The main reason is that MMOs blow away any attempt at asset budgeting.
Take a game like Crysis or Gears of War, with top-end graphics. They have a fixed number of player models. The enemy types are often broken down by zone or level; often those enemies will share textures or materials with other things in the environment, to save memory. At most you're going to have a dozen people (by far the most expensive things to render) on-screen at once.
By sharing textures and only having a handful of models, these games can afford to have more polygons, more shader effects, and more detailed animations. So when they fix their budget at, say, 512MB of RAM and a 3.2GHz processor, they know exactly what the most expensive scene in the game is, and can make sure that machine can play it at an acceptable framerate.
In MMOs, you don't have that luxury. The levels are large. Enemies can be trained from one end of the map to the other. Players can wear whatever they want, and expect that to appear on their character model - meaning their models are often many separate models in practice. You need to be able to render dozens or hundreds of players and enemies at once. You're animating more, and you need to be prepared to render any character model or texture at any time.
When figuring out the budget for an MMO, you have no idea what the most expensive scene is. Fifty players in your frustum? A rare item you didn't expect to need to load? Better have the graphics memory and CPU resources ready!
But these are exactly the kind of situations players love - as many people as possible at the same place, drawing myriad mobs into the middle of a town, showing off as much sparkly alpha-blended light-emitting gear as possible.
What everyone else has said about MMOs targeting lower hardware is sometimes true, but it really comes down to that. The worst rendering scene in an MMO is not known at development time and you can count on players to try to make it as bad as possible, no matter how good their hardware is. The "worse" graphics you have, the more you can scale up before the game becomes unplayable.