The thing that, for me, makes the jump between a quite good RPG and a really good RPG is that one turning point when you stop caring about what you'll lose later on for your decisions and just make decisions that feel like they're correct. A few games have reached this point for me such as Morrowind, Dragon Age and KoToR II, all of which are featured amongst some of my favourite games of all time.
However, only Morrowind has both given me the freedom to do this, the immersion to get me to do this, and also not have me lose something significant later on.
Also, Morrowind earned the distinguishing mark of tossing most of the usual fantasy stereotypes to make way for the setting to really shine. The Dark Elves aren't evil, nor are they goody-two-shoes Drizzt types, but they're all xenophobic to a certain degree and definitely don't like outsiders. The Wood Elves aren't the tree-hugging freaks you meet in a lot of other settings; they're surprisingly down-to-earth except for the odd case of cannibalism. The Orcs seem a bit too much like the ones from WC3, but the Nords are quite far away from the stereotypical Viking. The setting is very different, with the whole egg/ebony mining deal. There's nearly no recognizable animals or beasts, the Kwama beings are an interesting touch, and the Daedra are varied and interesting. The equipment is cool-looking and unique, (glass being my favourite), and you can customize them to a much greater degree than in most other games with the enchanting system. For me, at least, there were very few immersion-breaking sequences.
On the other hand, Oblivion was only tolerable once I downloaded Deadly Reflex, and even then it felt one-dimensional.