Having looked at Radiant AI and the game 'Façade' , it comes to mind that it's likely in the future that a game could be made which is completely open ended, like Oblivion, but with no linear aspect at all. Characters would interact with each other, with the environment and with you the player. They'd interact all over the game world, even where your character wasn't, living out lives based not on pre-scripted behaviour, but based on an ability to make complex choices, taking into account:
Bodily functions, basic desires (rest, food, comfort, procreation) Social constructs and restrictions, long term goals and personal morals and feelings.
I was disappointed, the first time I played 'The Sims' by how stupid they were. If left to their AI, they simply didn't seem to be able to cope. Within minutes they were skipping work and getting fired, peeing on the floor, waking each other up with loud noises... It was frustrating, because I wanted to watch them learn and adapt to each other and start running a home as best they could based on their personality traits.
If you could get complex enough AI, you would be able to do fascinating things. Simulation of relationships between family members and friends, interaction of tribes and social groups, realistic battle simulations etc. Perhaps a character, on gaining power, would become an evil overlord, and then people would rise up against them for the greater good. The player would be able to fight with the revolution or maybe try to get hired by the overlord as a bodyguard, or try to earn their trust and assasinate them. I doubt AI will get that complex for many years yet.
As a comic artist, I'm used to thinking of my characters as real people. I can easily know what the character would do or say in a situation, be it social or combat. Should an NPC always follow orders to the letter? I don't really think they should. I think they should behave with consistent internal logic to that character. NPCs with personality and common sense would be a real asset in a lot of games. At the moment, we can see the effect of a sandbox physics pack in 'Garry's Mod' where you can put things together and see what happens. What about a sandbox AI simulator where you could put a bunch of people in a house, say a smarmy lawyer, a gruff marine and a sensitive artist together in a house and watch them interact. Then you could drop in some guns and surround the house with zombies and see how they interact.
Suppose each character has stats sliders, but they're personality stats, like this:
Introversion (contemplative) - Extroversion (active)
Intuition (works on internal guessing) - Sensing (Works on external cues)
Thinking (Objective) - Feeling (subjective)
Judging (Measures things by numbers/facts) - Percieving (Judges things by what looks right)
That's just using basic Jungian archetypes. Imagine if we throw in a choice of a character's social status and morality. You would find characters start to act very differently from each other. An intuitive extrovert may immediately grab a gun and start blasting zombies, while an introverted senser may start to look around for another option, such as 'is there anything I can use to make a barricade?'.
As well as a useful thing for simulations (such as predicting what might happen if a disaster happened in a major city) you could use it to make highly immersive games, where firing a gun in public creates a realistic reaction (some people try to run, others hide, others ask what you're doing, some may even attack and try to get the gun off you). Rather than a universal reaction like, 'All citizens run away, all cops attack'.