Repeat after me : You are in a game

Games more than any other medium are constantly asking people to suspend their disbelief, constantly signaling to the player 'you are in a game'.

This is probably just part of the baggage which comes along with being a interactive medium. As long as games need to convey visually none visual information addressing the audience directly will always be a necessary part of it.

Some of the most prominent designers in this generation of games seem to have reacted by either trying to maintain immersion and keeping as minimal user interface (UI) as possible, or going to the other extreme and speaking directly to the audience and constantly knowingly making references to games and pop culture.

The Metal Gear series is often picked out as one of the games which most employs the most sophisticated post modern approach but sadly the fact I've never owned a Playstation which mean I can't really comment on that series, instead the example which pops to my mind most obviously is Blizzard's insanely successful Massively Multiplayer Online Role Playing Game (MMORPG) World of Warcraft (WoW).

WoW is overt about both its nature as a game and it's place in a wider cultural context.

Death in wow is a incredibly impermanent state. Prior to WoW many games tried to employ a tough penalty on any death and while not the first game to do so the fact that WoW's designers seemed to realize that players were happy to accept the respawn mechanic which was so routinely employed with non player character's (npc's) in games. If a player didn't care about how a monster they had killed 5 minutes earlier was suddenly alive again why should they care if when they died they equally suffered no penalties.

Both the permanence of death and impermanence of resurrection could have created huge problems for a game as open ended as wow if it had tried to treat story in a over serious way. Blizzard however seems to have realized early on that wouldn't work and have always given players a knowing wink about it.

A good example is perhaps the death of the 'Big Villain' of the original wow Kel'Thuzad. Kel was the end boss of the original game the very final challenge players could beat, and when they did beat him they were presented with a very obviously acknowledgment that just like all the best villains he would soon be back.

The phylactery is all that remains of the master of Naxxramas. Your better judgment dictates that you destroy the phylactery, preventing the lich from ever reforming. Thankfully, you seldom listen to that internal voice of reason.
Someone at Light's Hope will pay you hugely for this artifact. Who cares if Kel'Thuzad regenerates to full power?

As WoW's approaches the release of its third expansion pack wow is more and more employing such referencing of 'the real world' .

Wow may have started off as a MMORPG but the RPG part has in many peoples opinions begun to become less & less important.
In a wider cultural context its clear that there has developed a kind of Post Modern(god i hate that term but i cant think of another one) Fantasy genre which retains a strong sense of self awareness and irony about the genre which has been popularized by authors like Terry Pratchett, and JK Rowling.

These authors and WoW both seem to share a irreverent attitude to fantasy conventions, and instead use humor and cultural references to help connect with a audience. The successful use of parodies of popular Films (Indiana Jones), Music( and Dance) and Literature (Hemingway) by WoW helps it to avoid some of the stigma which typically comes from playing a fantasy game.
WoW can be played at different levels of imersion depending on your mood and preferences, when a game forces you to either belive its fiction or not engage with it on any level it is imediatley excluding a large amount of its potential audience.

I'm not saying this is the only kind of game which can be successful it is just a personal feeling that if you look at what traditional games have been the most successful it is those which have been the most abstract and most about the pure mechanics of the game and adopted aspects of the culture in which they took place.