"We've really gotten much better at this," Howard says when discussing the living world of Oblivion. "We're really focusing this time on how people in the world react to you, because that's the most fulfilling thing about being good or bad or in-between." The game sports a new "Radiant AI" system that Howard says is best described as a combination of Ultima 7 and The Sims. Rather than following pre-scripted paths, every NPC is given a set of general goals they'd like to achieve, but the details of fulfilling that goal is entirely up to them. If a citizen is hungry, they'll look for a way to get food. They might buy food, hunt it, or steal it, then find a place to sit to eat and so on. This means that every one of the game's 1,000 NPCs follows a full 24/7 schedule that continues whether or not the player is there to witness it. It also means that the NPCs react to each other, so a townsperson who decides to steal a loaf of bread in full view of the guards may find himself under arrest.
It also means that everything the player does in the game that's witnessed by NPCs is processed and remembered by them, who will then use that information to decide how to react to you. Interactions are governed by what the player has done to them, what groups or guilds they're both a member of, whether the player has messed with anyone in their family and what their general reputation in the Empire is. Players who just watch the NPCs going about their daily lives will often witness townsfolk in unscripted dynamic conversations gossiping about what's going on in the kingdom and what rumors and news is currently hot.
In fact, one of the interesting problems that the team has had to face came about precisely because the AI is so good. According to Howard, the AI has caused guards to decide to eat and go hunting deer, only to get themselves arrested for attacking something. When they fight back against the arresting guard, the other guards see a fight and try to join in. In not too much time, every guard in the town was involved in the scuffle, which left the rest of the town open to thievery by other NPCs, resulting in empty stores. Much of the team's current effort is going into putting sensible governors on the AI's behavior to avoid situations like empty stores that would result in situations that wouldn't be fun for the player.
