Immersion is the #1 most important factor of an RPG. It's the complete opposite of a "buzzword" - it's a fundamental tenet that RPGs have been based on since the birth of the genre. Here's the catch, though - Immersion does not mean Realism. Sometimes the two concepts intersect, but they are far from synonymous.
Immersion refers to a continuity of tone or themes in a game. A simulated world should play by its own rules - when it fails to do so, the player's immersion is broken (assuming the player is conscious of his/her immersion, and not just mindlessly clicking buttons). In The Witcher 2, Geralt's random acts of robbery and the blank stares of peasants that accompany them are a perfect example of the game-world failing at its own rules. Like a glitch in the Matrix.
In case it isn't self-explanatory, here's why: Geralt's character (in both the books and the games) is along the lines of a "neutral good" alignment for those of you who are familiar with D&D. He fights evil 'cause it pays the bills, so he's no hero. But if he saw a kitten about to be devoured by hungry drowners, he'd probably go out of his way to save it. This isn't the type of character who would compulsively loot every cottage in his path, especially when the villagers we come across in The Witcher 2 are usually dirty and destitute. These are the types of people Geralt helps (for coin), not the type he robs. However, Tw2 is an RPG with a crafting system, and it would be pretty bizarre if the world were strewn with crafting items outside of peoples homes, but nary a book or a ladle to be found within. The items are there because they belong in the game world - that's an element of immersion. But CDPR has allowed the player to simply ransack these poor NPC's homes without redress! The fact that Geralt can't even draw his sword in Flotsam without alerting every guard in the area, but those same guards couldn't care less when he fills his pockets with someone else's twine, is an incongruity in the rules of the game-world. It's a deviation from the tone of the narrative - this is a dark, serious world where crimes have severe penalties (just look at Geralt's back)- and the omission makes for a glaring break in the player's immersion.
But again, if you play games without thinking about plot or tone or characters or themes - if you play games simply to amass the biggest stack of timber or the most Arena points - you won't have to worry about immersion, because it doesn't exist for you. There are better games than Tw2 for gamers like that, though. World of Warcraft comes to mind.