Handman said:
Well, people's standards change. Look at a PSOne game. It looks terrible by todays standards, but back in the day it was state-of-the-art! Same with Toy Story (although not so bad as the PSOne game)!
I thought PlayStation games looked terrible from day one, just as I did with all of the early 3D games, even in the arcade, such as Virtua Fighter and Tekken. The only games that looked good on the PlayStation were the few 2D games, such as Castlevania: Symphony of the Night, and only then on a standard resolution (~15 kHz) CRT display.
If we're talking about movies, "looking good for the time" relies on what people will accept in a movie without taking them out of it. A sort of "suspension of disbelief", if you will.
All of the CGI character/critter additions in the '97 SE stuck out like a sore thumb, because they looked cartoonish in an otherwise live-action movie; i.e., the Who Framed Roger Rabbit? effect, minus it being part of the premise as in that movie.
As far as Toy Story goes, it looked good enough that it could be seen as an artistic/stylistic choice (such as a particular style of hand-drawing chosen for a cartoon or comic strip). The characters/objects weren't all jagged polygons like in a PlayStation game, which screams of "technical limitations" rather than "artistic/stylistic choice". The CGI in the '97 SE wasn't jagged polygons either, but the problem there was that it was trying (and miserably failing) to pass for reality, which Toy Story obviously wasn't trying to do.
Without a doubt, special effects age. In 1997, the effects were state-of-the-art, and people could look at them without breaking their suspension of disbelief. Nowadays, that isn't the case.
They could make a lot of types of special effects look more believable in '97 as compared to '77-'83, but they were still a long way from being able to create realistic looking people or critters entirely from CGI. If they'd just stuck to things like digital recompositing and enhancing the look of certain explosions, that would be a different story.