There is quite a huge market for frivolous items which make your character "look cool". It was a long time ago that I played World of Warcraft, but there was a certain % of people who paid vast sums of in-game money for basically cosmetic reasons. Similarly, Valve's Hat Fortress 2 has had great success in selling purely cosmetic items.
Yup, vanity is alive and well in these games.
In World of Warcraft there's now a "transmogrification" feature where you can apply the look of older gear to your current gear. It lets your character continue to look cool after a new expansion comes out and you're replacing your awesome looking epics with ugly vendor trash. The transmog feature costs some in-game gold to use but not much in the grand scheme of things. Some players spend a great deal of time running old dungeons to get gear for the purpose of acquiring a certain look.
Then there's a huge market for pets (critters that follow you around and do nothing useful), mounts (critters that you ride to travel more quickly, and some look better than others, but they almost all fly/travel the same speed), etc...