Is it just me, or does the special effects in movies from thirty years ago often look more convincing than in films today? The technology has progressed by leaps and bounds. The question is how efficiently it's being used.
One of the issues is CGI. No matter how sophisticated it gets, it doesn't look as real as physical models. You can see the difference by comparing Jabba the Hutt in Return of the Jedi to the CGI Jabba in Phantom Menace.
The catch is that CGI seems to get better with each passing year. Will it ever achieve photo-realism? The tentacled Captain Davy Jones in Pirates of the Caribbean comes close. Yet just this year, the third Pirates movie curiously lost a Visual Effects Oscar to The Golden Compass, which created a CGI bear that, to my eyes, looked like it came right out of a Pixar cartoon.
Another issue is changing actor's heights. By manipulating the angle of the camera, you can make someone look substantially taller than someone else, even if the two aren't far apart in height. It's an old trick: I remember seeing it in the Faerie Tale Theatre version of "Jack and the Beanstalk" when I was a kid. It wasn't convincing back then, and it still isn't today.
But today they seem to do it a lot more. In the past, when they wanted a giant, they got a giant: Lock Martin as Gort in The Day the Earth Stood Still, Peter Mayhew as Chewbacca in Star Wars, Andre the Giant as Fezzik in The Princess Bride. Nowadays they get an actor of relatively normal size and try to make him seem much taller.
Hence the Harry Potter films have 6'1" Robbie Coltrane play seven-foot Hagrid. Sometimes they use the old camera-angle trick, as in the scene where Hagrid enters the bar. Sometimes they play around with the props, as when Hagrid has to duck through a doorway (which may simply not be that high). Sometimes they have him loom above the camera as if to suggest that the other characters are craning their necks upwards to see his face. But most of the time they just avoid shots of Coltrane standing next to the other actors, especially the adults. To fully appreciate how unconvincing this is, you need only look back at The Princess Bride, which featured many ordinary shots of Andre the Giant towering above Cary Elwes and Mandy Patinkin, both reasonably tall men.
Lord of the Rings went in the other direction, casting ordinary-sized men as hobbits. Why they felt the need to do so is curious, since there are many talented dwarves in Hollywood. But one way or another, they did it, and while they used more sophisticated techniques than in Harry Potter, in no way does it look real.
The films seem to assume that we can't estimate an actor's height unless we already know the height of someone standing next to him. Therefore, they use no special effects at all when the hobbits are seen only with each other, which is most of the time. In those shots, the hobbits have normal, proportionate bodies like any average adult male in our world. But when allegedly tall characters like Gandalf or Aragorn appear, suddenly children or dwarves are used as body doubles for the hobbits, and I suspected the filmmakers of occasionally resorting to the technique popularized in Forrest Gump, where an actor gets superimposed over separate footage.
What past filmmakers had that the current filmmakers don't can be summed up in one word: restraint.
Steven Spielberg famously agreed to direct Jaws only on the condition that he wouldn't show the shark at all in the first hour. Even by the second hour, we only see fleeting glimpses of the shark at first, and it isn't until the climax that we get a really good shot of the thing. The mechanical shark they created was spectacular, but Spielberg took his time in getting to it.
Similarly, the original Alien features very few shots of the creature. Even in the famous scene where the alien eats its way out of John Hurt's body, we see it for no more than a split second. If we had seen it any longer, we might have started to notice it was an effect.
Undoubtedly, the effects wizards today can make better-looking sharks and aliens than they could thirty years ago. But the filmmakers have lost a sense of when to stop, to leave things to the audience's imagination. They shoot for too much and end up with too little.