That said, I think it's just as important to look at a good example of story use in a video game as it is to point out poor use. Knowing what constitutes a poor game story only tells us what not to do. It does not tell us what we should do.
To that end, I want to take a look at some of BioWare's Forgotten Realms games. For you non-gamers, Forgotten Realms is Dungeons and Dragons setting on which a series of role-playing games was based where you design and play a character in that particular fictional world. Games that BioWare created, such as Baulder's Gate, are often spoken of as the standard that other fantasy role-playing games are held to. One of the reasons for this is the outstanding story lines and use of story in a gaming environment.
For the sake of this post, I'll only be looking at Neverwinter Nights, but many of their games follow the same rules. I highly recommend Baulder's Gate as well!
In Neverwinter Nights, you start off with a cut scene that sets the tone of the story. You're stuck in a plague-infested city, with limited hope for a cure. The walls are sealed as part of a quarantine, which effectively limits your exploration, but in reality, the city maps are huge, so there's plenty to do even then.
The cut scene explains the setting and why you are where you are. No more. It does not insult the gamer's intelligence. It does not try to teach you anything in a video tutorial. It doesn't cause your character to perform any actions you don't want him/her to do. It just tells you the state of things and why you are standing in an Academy. Perfect! I'm caught up in the story, and I'm ready to play it out!
The first part, as in any game, is the tutorial. You go through Academy training. The great part though? You can skip the training completely if you want and get right to the game!
Sometimes these things are worthwhile to play through though simply for the dialogue. This is a great aspect of the Forgotten Realms series. You have dialogue options to choose from. Depending on what your character says/does, different results occur. I often play through the same game story line several times in several different ways just to see all the neat plots that I missed the first time around! I will admit that this was probably a lot of work. You're basically creating dialogue trees or loops instead of straight dialogue, which can increase the size of the project exponentially. But the ability to choose what you character will and will not say is wonderful. Maybe you don't want to run a quest for someone who is mean to you. Maybe you want to slay an innocent peasant and play the villain. Maybe you want to trick someone into giving you more gold. Maybe you want to donate gold to the person who needs it. That's the best part! You decide.
The story in these games is actually played through. Don't get me wrong. This still requires a writer. Only the writer plays the computer side of things (the NPCs, or Non-Player Characters). Bad guy is discovered? You actually go through the portal and haul him back for a trial. Trial time for a minor character? You get to play the defense attorney or judge! A cure needs to be created? You get to do all the hard work of finding the components! The writer just makes sure that you have the ability to get the information you need to complete the story line. Sometimes the information is buried in dialogue choices. Sometimes it's obvious. Intelligently, the main story line information is usually easily found. Optional side-stories are sometimes not and must be searched for.
The "levels" of the game are broken up into "chapters." One of the really neat things about the game was that the completion of a chapter rewarded you with seeing the results of your actions in a narrated cut scene. Maybe your actions, as well-intended as they may have been, brought misery to someone. Maybe they brought hope. Either way, you get to see what far-reaching effects they had, and you are set up for what is to come next. It's a pleasant and engaging reward for work well done. The cut scene wasn't too long, and again, it didn't presume to have your character act for you. It didn't reveal anything it shouldn't for that moment.
Which brings me to the last item I want to talk about. The story was often filled with twists and turns that left me staring at the screen and wanting to know more. I played for hours just to find out the next part! I felt like I was living a book, and that is what really grabbed me. I think this is a series of games any fantasy reader could really get into, if only for the story.