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It’s becoming well-known in the industry that we are quickly approaching a level of graphics fidelity that will put us into a negative trend which Masahiro Mori called the “uncanny valley”, a level of detail where humans look real enough that we are disturbed by the sight of them.
After reading the first sentence of the editorial, I thought the topic was going to be about the negative psychological consequences improved graphics can have. Meaning, if you couldn't tell the difference between shooting someone in the chest with a shotgun in Half-Life 2 and watching a video of someone blowing a hole in another man's chest it could seriously mess with younger kids' minds. But I suppose that's a whole different editorial.
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NPC characters need to have the ability to react to their surroundings, react to the unexpected, and generally react as you would expect their personalities to react.
While this sounds like a great idea, wouldn't it completely change the way games are played? Think about playing a competitive multiplayer game against one of your friends who is as equally skilled at videogames as you are. How often do you die? Probably just about as often as (s)he does.
If enemy AI is brought up to snuff with your average human, games will no longer be able throw countless enemies at the player because a simple two-on-one will most likely result in death.
Pretty much every adventure game, platformer, and first-person-shooer will have to be rebuilt from the ground up in order to compensate for human-like AI. There will no longer be an epic struggle between one man and a legion of evil minions. Instead there will have to be one-on-one battles (or one-on-few).
Life-like AI would definitely be great for sports games, fighters, RPG's and strategy games, but I don't see how it could happen for other genres.