Sodapoppin made a really good point a few years back about transmog. There’s something visceral about walking into a city and seeing somebody decked out in tier 2 armor, and there’s an immediate connection between someone wearing that armor and someone who sees that armor, and suddenly wants it.
It kind of feeds back into this idea of player-driven goals that are primarily outlined by community interaction. Nobody is outright telling you to get that gear, but seeing someone with that gear invokes a very immediate feeling of determination, mainly because you know that, after all the time you would inevitably put into getting these gear sets, you would have something to show for it.
I’ve still yet to play any game with a loot system better than World of warcraft pre-Cataclysm. It wasn’t just a sense of power, but a sense of accomplishment (inb4 EA comments).