Much of the free stuff out there is often very cartoonish looking so what is it that developers do to make their products look so much better?
The main difference between some freeware stuff (and I have to say, even some commercial stuff...) and the best commercial products, it's usually that freeware developers, especially on the area of textures, focus too much on the wrong thing, which are the texture's "colors", as seen in a graphic editing software (say, Photoshop, Gimp, etc.), without realizing they'll look different in the sim, and they forget that the most important part of a texture are NOT the colors but, instead, the contrast between dark and light and how shadows should be applied.
Colors are not really important, because they keep changing even in real life (just compare different real life pictures taken at different times of the day of the same airport, colors will look very different), what makes the difference between what you call "cartoonish" and a very well developed scenery, is how the scenery author understood LIGHT (and shadows, of course, which is the same thing).
Don't ever forget that "Photography" really means "Drawing with light" and "Photorealistic" it's something that depicts light realistically...
Skill with Photoshop to create great textures? Advanced modeling programs (ADE, 3D CAD, etc)? Special programming skills (C# and the like)? Access to high-res imagery? So I guess I'm asking where should I start on the road to something higher quality?
You need all of these, adding knowledge of the FSX graphic engine quirks and limitations too. Access to high-res imagery is probably the less important thing.