Jedi Knight used an in-house engine developed by LucasArts. While it was in some ways superiors to the slightly older Quake I engine, it already couldn't stand its own against the Quake II engine. Now, with a heavily modified version of the Quake III Team Arena engine, Jedi Knight II is graphicaly far better then Jedi Knight.
As you can see, way higher polygon count and higher resolution textures can work wonders with player and enemy models. Especially in the case of the Gran, where the Jedi Knight version was barely recognizable and the Jedi Knight II version looks like as if the picture had been taken from the movies.
In-screen weapons vary greatly from the previous game as well. While Jedi Knight's weapons have been crude model-looking devices, the new weapons look just like in a film.
Light effects have gone a long way towards perfectionism as well. While Jedi Kinght's explosions and light effects looked pretty modern 4 years ago (especially with 3D acceleration), the industry moved on and Jedi Knight II's effects are vastly more impressive. Some of these light effects look even better than those of contemporary games created with the same engine (like Quake III Arena and Elite Force).