In existing games it's done in cutscenes. You have emotive story cutscene, followed by action gameplay, followed by emotive story cutscene, followed by action gameplay
And it will continue to be because the artistry necessary to create and manipulate emotions requires fine control over what's going on. Further, each experience needs to be unique, or it will lose its impact. If each and every single individual emotive act by an in-game character is not uniquely hand-crafted, the game will indeed feel quite wooden. We are nowhere near the point where computers can synthesize unique character emotion and dialogue. "Oh wow, he's doing the sad walk again. I totally empathize."
And another problem with gameplay is that you're too busy shooting weapons and running around to stop for 5 minutes and watch the pixel-shaded tears roll down a soldier's normal-mapped face as he comforts his dying buddy with professional lines delivered by Hollywood-quality script writers and voice actors. And even if you did bother to stop, how many players would? Enough to justify paying the voice actors, script writers, and animators for the hundreds of such scenes necessary to craft in the game world to make it "emotional?" No, you're going to make like Master Chief and shoot everything and everyone in the face until the game forces you to take a breather. How come so few games have managed to surpass Half-Life in this area despite having vastly superior technology? Could it be more about talent than texturing?
There is the possibility of the player getting emotionally moved by things that happen to his character/sidekick in-game, but that hardly requires technology. You know what the most emotional moment of that type in any game was for me? When Woof died in Fallout. Various events in Torment follow close behind, although Torment as a whole was the most engaging emotional experience I've ever had in a game. The third was when this dude Leonid that had been with me since my first wave of recruits died in X-Com as we were fighting the last battle on Mars. The fact that any of the fancy 3D games with far, far superior capability for expression have yet to surpass what I experienced in sprite-based games should say something about how much technology matters to the emotional experience.
Oh sure, you might get one, maybe 2 really moving games next gen. That's because only one, maybe 2 developers are talented enough to do it, regardless of the technology. The rest will just claim they're producing art when they're just ripping off Lovecraft.
P.S. Watch the new Mario Galaxy trailer. THAT'S art.
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