I've said this before. KoTOR's innovation was cinematic presentation.
Before a certain game, RPGs were slow, grindy, number crunchers for nerds. After a certain game, RPGs became cinematic spectacles. That game was Final Fantasy 7.
You may not think JRPGs are "real" RPGs or whatever, but that is irrelevant. Game publishers absolutely did not see that distinction in 1997. They only saw a game with stats and level-ups selling ten times the number of copies anyone even thought an RPG could sell. It was actually embarrassing to western devs, many of which were told to develop 'FF7-killers' ASAP. This inspired games like PST and Anachronox, but they failed to understand FF7's true appeal.
It was Bioware who succeeded at stealing the thunder from Squaresoft. They understood the game was about the cinematic look and feel, so they set about doing the same with Star Wars. Under the hood, KoTOR is the same game as Neverwinter Nights, but it looks and feels completely different. The shot-reverse shot camera angles, close up for dialogues, full VO, and the cinematic animations for battles make the whole game feel like you are playing a star wars film.
Story and choices are red herrings. The point of Bioware games has never been to have a deep or reactive story. It's to have a story that looks and feels dramatic. It's all smoke and mirrors.
The cinematic RPG is sort of dead now so it's easy to look back at KoTOR and say yeah it's not a great game (i've always thought the story and characters were trash). But that was never the point, while the use of full voiced dialogue and cinematic framing in every part of the game was quite revolutionary.