Well, is it?
First off, I've noticed that some people consider VII to be overrated because it has sold a lot of units, it is talked about a lot, has X number of spin-offs or some other similar reason. That doesn't make VII overrated; it just makes it popular, two different things.
That said, Final Fantasy VII is my favorite game and I don’t think that it is overrated; I think it is a monumental groundbreaking game worthy of all the praise it has received. It singlehandedly brought the RPG genre into the mainstream, giving rise to a herd of clones after it's release and was a crucial factor in the failure of the Nintento 64 and the triumph of the Playstation.
I'll try and elaborate a bit on some general aspects of the game. As a whole, VII takes a new approach to the world of an RPG. It got rid of the castles, kingdoms, kings, knights and princes which had become the trademark if not the clichť of the genre and the series. It brought instead a modern world that more directly parallels our own. This allowed gamers to better relate with the world and characters of the game and derive something from it that is applicable to their lives. The game also has plenty of social commentary to encourage that, something that previous games lacked for the most part.
Character development also rose to a new level with this game as the characters got more deep and able to convey a wider set of emotions than in previous games. It is not just because of the better graphics, it is their behavior, the way they move, react, speak and change during the game. Each character has a strongly marked personality and is several layers deep.
The story itself is far more engrossing and complex than any of the previous FFs and travels into a new territory, previously untouched, in exploring the psychological aspects of the characters and coupled with the modern world in which it takes place, it touches on issues that are directly relevant to our world, unlike previous games which seemed content to remain on their own bubble.
The game also moved away from the typical two dimensional villains that had been part of the series. Now it was not just some crazy evil man who wanted to destroy the world for no reason other than pure enjoyment. Now we get a villain with more sophisticated motives and also a set of antagonists whose motives and machinations are explored to great detail (the whole Shinra staff). The game also blurs the line at times between good and evil, trying to make you see the acts of the antagonists as good, such as when Shinra is trying to stop the Weapons and Meteor, a good development that we would see again in X and XII.
The materia system was quite innovative in my opinion and to this day remains my favorite system. It is like the job system...but on steroids. It gave grater freedom to customize your characters than previous games. Something I like about the materia system is how strongly tied to the story and the rest of the game it is. It is not some isolated thing that is relevant only in battles; it is rooted in the story and directly derived from it.
There are also many small but great things that were new which I think are often overlooked but is what contributes in making this game great. I mean, I never did something in an RPG like riding a bike to escape some place while soldiers chase me and I have to take them down with a sword, or chasing a submarine while firing torpedoes at it, or climbing a cold mountain while keeping an eye on my body temperature, or something like the strategy battle at Forth Condor or breeding Chocobos. I could name more of these small things but all in all, the game packages so much variety into it and so well, it is like if you do a bit of everything in it. All this is also distributed across the story very nicely and the game enjoys an incredible pacing, never allowing a dull moment to creep in.
The new graphics were also a major breakthrough for the series in particular and RPGs in general. Granted, games with better graphics have been released and compared to them the graphics of VII feel dated, but I think the graphics, dated as they may be, still hold up quite well today and the FMVs even more so. Games with better sound quality have also been released; which is not to say that their soundtracks are better than VII’s, just that they have a fuller sound.
But neither graphics nor sound alone are what make this game a masterpiece, it is in something that can be achieved apart from these things where VII truly excels and where it’s true charm lies: story, characters, pacing, game play, etc.
That’s where the magic is and after all these years this is what remains and will remain of VII (unless there is a remake, in which case the graphics and sound would rise to new heights). These things are more than enough for it to soar head and shoulders above all others. New games may have better graphics and sound, but in my mind, they have yet to top VII in the other more important things.
Well, this turned out longer than I expected...discuss.