Lore is a necessity. The more dense, the better.
However, it needs to be done with proper style, pacing and atmosphere.
Oblivion (or Elder Scrolls in general) is a good example of how to do lore. It doesn't shove "the world" in your face, choking you on exposition and insane unedited ramblings, it simply makes you a part of it, then gives you lore if you want it. Try to imagine Oblivion or Morrowind without all the books, or the cult followings of the various gods. Basically, it turns into a lore-less MMO. Blasphemy. You could plow through Oblivion (or Morrowind), doing what you want, and if you so choose, can immerse yourself in locations, piles of books and conversations dealing with the history, current events and your role in all of it. If you want to..
Metal Gear is a poor example of how to do lore. The latest game being the worst offender. Nothing is edited, there are too many insane ramblings of things that make no sense, and literally does not affect anything you do in the game, aside from forcing you to sit there and listen to it. Not only does this suck, but it also commits the biggest game-crime of all time, being that it starts making your brain wander in confusion or just out of utter contempt. Please, just, stop.. talking.. Otacon... stop.
Silent Hill is another good example. It's compact, but dense. You're constantly asking questions, imagination running incessantly. Though it has the problem of leaving too many unanswered questions, allowing you to drift off with your imagination making false assumptions about the true lore.
TL;DR
More lore.