MJP, I know very well what HDR is. While they may be using it somewhere in the rendering pipeline, I've seen very few games that actually use high-dynamic lighting. In my world (CGI), HDR is (at its most basic level) the ability to go outside the normal bounds of 0-100% illumination (0-255, 8-bits). To have sunlight that is literally a thousand times brighter than a light bulb. In direct application, it tends to yield results with very high contrast (very bright highlights and very dark shadows), without losing any detail. Nothing in the illuminated area is blown out, and nothing in the shadows is crushed. And yes, it can certainly result in some amazingly lifelike results, especially in a linear colorspace (which is a whole other matter, I don't know if games are even touching on that yet).
Contrast and preservation of detail not the direct results of HDR rendering. By itself, HDR is really just about what you mentioned in the first part of your post: using a wide range of values for radiance and irradiance during lighting calculations. But all this does is allow you to have a more realistic light transport simulation (AKA simulating the physics of light/material interactions)...it doesn't necessarily enhance the quality of the final image that gets displayed on your screen. In face on its own it will give you worse results: if you just map your irradiance values to pixel colors directly, pretty much everything will be blown out whites. To make it actually look
good, you have to use tone mapping. Tone mapping is essentially where you simulate the process of light entering the eye or a camera, and then striking the retina/sensor/film. It is here where you take into account things like exposure, or contraction of the iris, and apply some sort of non-linear curve to bring the HDR values into the visible range. The results of this process are incredibly subjective...I mean just think about the amount of time a photographer takes to set up exposure and shutter speed in order to produce an image that looks "good". A lot of people lump HDR and tonemapping together, but I think it's important to realize that they're both separate things. It's especially important in understanding why games look the way they do: most games use the Reinhard operator for tone mapping, which preserves detail but results in a low-contrast "washed-out" look. They also have to automate parameters selection for exposure and other values, since in a game you can't tweak shot-by-shot.
Oh and related to the "linear colorspace" bit...this gen plenty of games are using a gamma-correct pipeline. This is partly because important to getting nice results (no banding!), and also partly because current-gen consoles provide the hardware support necessary for doing it.
Most games have very flat lighting.. the illuminated areas aren't really that much brighter than the shadows. Now, I've seen games use lighting solutions that yield good results, like Assassin's Creed or Uncharted, but Crysis is about the only game I've seen that really does it well. And even then, you have to push the TOD outside its normal settings to keep the lighting from looking flat.
This is related to what I said above, but lighting looking "flat" doesn't mean a game doesn't use HDR. Ultimately it's probably more related to the kind of tone mapping and color correction used. If you want, have a look at my
latest blog where I have a bunch of screenshots using different tone mapping methods. For instance you might want to compare
this picture (which uses a typical Reinhard operator), with
this one (which emulates the tonal response curve of Kodak film). The second has much greater contrast and a more satisfying color range, but both were rendered with the exact same HDR pipeline.
What I was referring to by the statement of "so-called HDR" are developers who use a limited-range lighting solution, but then toss a bunch of lens flares and bloom onto the image to make it look like it's using a HDR solution. They crank up the settings on things like specular highlights and say "ooo, pretty", but it's not real HDR lighting. For an example, take a look at the "HDR mod" for World of Warcraft. It's literally just a crazy bloom filter, but they're advertising it as a HDR lighting solution for WoW, when it actually does nothing at all to change the game's own illumination settings.
What you're describing sounds more like the norm for the previous gen, rather than the current gen. Also using an HDR pipeline doesn't mean that artists can't crank up the bloom...a lot of them like the sort of surrealistic look that it produces.