Original Comment by: Mark
My goal as an amateur game designer is to make a single-player game that can tell its own story inside of a world build around a premise. If the story sucks, it's because the player is no good as an author. Likewise, if the player has a keen sense of narrative and drama, the game should present a gripping story. And, as far as I can tell, there are two ways to do that: a "choose-your-own adventure" format where every possible gameplay decision is scripted out beforehand (which will utterly fail to account for everything the player can think of, unless it uses some sort of compromise), or an astonishingly robust AI system for all the NPCs (which again is extraordinarily difficult if you don't cut some corners).
In addition, the presentation needs to be good. Dramatic camera angles (a rudimentary AI impersonating Alfred Hitchcock?), music and lighting changing according to mood, perhaps a noticeable motif for major characters or events, maybe even voice acting for every single line in the game (which would probably be prohibitively expensive) pick two of these, plus some hybrid of the AI and Choose-Your-Own Adventure systems, and you'll have the tools for a player to generate their own story in a one-player game. And it still will only be any good if the player makes it good.
Once you have a system like that, you've essentially got an electronic dungeon master, controlling electronic NPCs, and a system that can be (painstakingly) adapted to another setting. A few things will be immutable - the story has to end in a certain way, for example, and it can only tell the avatar's story - and it will never be as good a story as a well-done prepackaged story. But it's a step in the right direction.
Storytelling in games is a very interesting proposition - in the past, the only thing that could be interactive about stories was the way in which they were told, and only if you had a live storyteller. The novel and the film, while very expressive media, could only produce a finished product. The role-playing game, which has only recently been seriously considered as a storytelling device, is the closest comparison, and it's still very much under development and having difficulty shedding the artifacts of powergaming. We haven't even created a game engine that's comparable as a storytelling device to a novel (as long as parsers are flawed) or the movie (as long as graphics cost more to make for a game than a movie). It's very new....
And that's not even beginning to touch on the inherent limitations of (single-player) gaming as a storytelling medium. The player, for one thing, must beleive that their avatar will triumph at the end. Since it's very difficult to model emotional conflict, this triumph inevitably takes the form of a physical conflict, or the same sort of whatever conflict has been used throughout the game. It's either that or a cinematic. If the avatar doesn't triumph in the end, then the presentation of that downfall is a failure unless it's either expertly foreshadowed or not foreshadowed at all. The player doesn't keep playing if s/he knows that the avatar's just going to lose no matter what. The story has to be drawn-out and sometimes convoluted in order to provide interesting gameplay scenarios using the same type of conflict.
Anyway, you can't talk about storytelling in gaming without mentioning Façade [http://www.interactivestory.net/], which in my opinion was still pretty primitive, (I couldn't, for example, say "You're both wrong." The game sort of forces you to take a side) although a great step forward for the development of stories in games.