King of Fighters would've had a much better legacy today if it would've actually have evolved at all graphically between 1994-2001.
The King of Fighter series was tied at the hip to NeoGeo during that time, so there wasn't much they could do from a technological perspective. Even so, they still managed to gradually improve the artwork and presentation in later games.
Oddly enough, I never really cared much KOF during that period, but I've developed a larger appreciation for the series over the last few years.
As
Labolas
said in the OP, the KOF games were a legitimate rival to Capcom's Street Fighter series. While KOF didn't top the charts in the US, I've read articles that it has a surprisingly large following in Latin American countries.
Mortal Kombat is appealing for different reasons. I never cared for the fighting engine as much as the Street Fighter games. Now that I've played more of KOF in recent years, I'd also say KOF is a superior game mechanically. The early MK games can still be fun to play, especially with friends (the computer AI becomes sickening after 3 or 4 matches), and as others have mentioned they ushered in a new standard for realistic digitized artwork. They also introduced hidden characters and other fun secrets to discover, which kept people's interest.
After Mortal Kombat moved to 3D and out of arcades, I lost interest for a while. The recent games (from MK9 onward) have greatly evolved the fighting engine, got rid of the cheesy AI, and added impressive in-game storytelling. As a result, the series is in a really good place now.