Ok, im quite new here so my opinion might not matter to some of the people. Nonetheless I need to say this.
There's a huge and I mean HUGE difference between something looking prettier and something looking more "real". I've a bit of a computer art background if I can say that at my age. Lightwave 3d and stuff like 3d Studio max are common programs for me. When it comes down to making something look good (as in realistic), it's 75-80% about the lighting.
Modelling something in 3d is all about the effecient use of Polygons, like many of you guys probably know. The more you have, the more detailed you can make something look. You can make curves more smooth and add more 3d surfaces to a model. In that, Forza has the advantage over GT4.
Second is the texturing. The higher resolution of the textures, the more detail can be seen at close range. Stuff like brands, stickers, leafs can look more convincing at close range. Again, Forza has the ability to surpase GT4 on that, simply based on the hardware specs.
Last but not least, the lighting. This is by far the most important aspect. You can ask any 3d artist this question. You can make a perfect modelled and textured car look horrible with bad lighting. While you can make a bad model with bad textures look convincingly real with good lighting.
Lighting effects everything. Propper lighting doesn't give a car more detail, it just makes sure it doesn't lose any. With really bad lighting detail gets lost, textures will look dull, polies will be wasted since you can't even see it's modelled in 3d because of the lack of light etc.
Now Forza doesn't have bad lighting. But in my view, it's just not as good as GT4's.
Forza's screenshots generally look nicer, prettier. But not more realistic. Ofcourse that's just my opinion, but I think Cobragt sorta means the same.
Maybe I can give a few examples. These models were all made and lighted by me a while ago.
The first link shows a wooden barrel I made. It has high resolution textures and bump mapping on its surface to make it look like it has dents and cracks. It is lighted by 2 bright yellowish lights.
http://members.home.nl/rgj.post/ton.jpg
As you can see, it looks fairly nice. You can clearly see the little holes in the wood surface reflecting by the lights shining on them.
Now, the same barrel, but lighted with HDRI. HDRI stands for High Dynamic Range Imaging. This means the barrel is lighted by the background picture, just like in real life. Everything in real life reflects light, from the walls of your room to the fingers on your hand. All of light reflected of walls, humans, trees etc, have their own color. So instead of lighting the barrel with 2 yellowish lights, it now get's lighted by the entire environment. As a result:
http://members.home.nl/rgj.post/tontest0001.jpg
(Discard the background pls

)
Now, this picture looks far more real than the 1st barrel picture. The reflections are way better. It might not look as pretty as the first picture, since you can barely see the nice bump-mapping used. But it's far more accurate to the real thing.
What im trying to say is that in alot of games and alot of computer art (even movies), special effects are overused. Stuff looks way too pretty. Colors are too bright, reflections too perfect, shadows too dark. So in Forza's (and A LOT of other cases) instead of the lighting making sure the perfect models and textures are as real as possible, it does the opposite and makes it look less realistic. In all the videos and pictures I have seen, I am not convinced Forza looks better.
Ofcourse, this is just my opinion like I stated before, but I felt like giving it anyway
Im sorry if it's a bit hard to understand, since my english is far from perfect. And if anyone needs more explanation or examples, just ask.
[edit] A perfect example:
http://www.newtek.com/products/lightwave/lw-gallery/albums/Transportation/302.jpg
Highly detailed, close to perfect model. But really really bad lighting. Tho there are still some ppl that say: "Whoa look at that, that's really pretty n stuff. Look at those colors!"
Now this is nice:
http://www.newtek.com/products/lightwave/lw-gallery/albums/Transportation/319.jpg
Fairly simple model, yet really convincing lighting 👍