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No one actually knows the answer.
It's overrated, because rabid fanboys and fangirls overrate it.It is not that much of a game and it's not the most interesting storyline in the series.
It isn't. It is simply called the best by some and worst by others.
Actually, to be more specific, Final Fantasy 7 was one of the biggest games that was released onto the Playstation because of its awe instilling graphics. While they may not seem so impressive now, back then, and trust me, it was revolutionary then. Seeing Cloud jump up into the air and launch a barrage of meteors onto unwilling victims was cool, but to get there is totally lame. Grinding and turn based RPG Combat. Ugh.
The characters are aesthetically pleasing to the eye, and while they are, they are no way the only video game designs in the world that are cool.
Its story was well executed, although, to some people (including meself), left much to desire, and felt a bit rushed, and was too orientated towards Sephiroth, the Jenova puppet, and people issues. Its settings and plot devices were very interesting, though.
So, it was popular for its looks, and somewhat of its story. Sephiroth and Cloud are overrated just because they look cool, and for what they are capable in battle to an extent. And its hype makes some fans turn into teenyboppers, hoping to look cool because they're in the "know".
And while gigantic swords are cool, I'm just hoping this will all past over soon. A game with bad gameplay but nice story and visuals doesn't cut it for a lot of people, and I'm wondering why it just could have been an action game.
It's all about the look, not for fun. And that's just stupid,
It was the first Final Fantasy game to have "mainstream popularity". And some people hate popular things, so they don't give it a chance. No, it's not the greatest game in the world, but, imo, it deserves it's fans.