Answer: when you cannot tell it's a background
I've been giving a lot of thought to backgrounds for my basement layout, and rather than paint the walls I've elected to use model structures of various sizes and elevations. I am far from finished and maybe someday I'll feel confident enough to share pictures. However, no matter how artistic a person is or no matter how beautiful a background is made, the viewer generally also can tell it's a background, no duh!
Then a light bulb went off. Could a layout be made such that the viewer wouldn't know where the background is? What if you were in a room that you didn't know where the walls were and where the train tracks led to? Does anyone relate to this somewhat abstract concept? If so, I'd love to see your layout.
Then another light bulb went off - I've seen something like this before, albeit not exactly what I envisioned, a long time ago in a Clark Dunham's layout, specifically the **** gate bridge display. TM made a video, but all I could find on the internet was the following teaser video. At about 50 seconds into this short video, you'll see a quick scene of the Hellgate bridge display.