Forget the latest Pirates of the Caribbean film. Forget the 50 Cent-Kanye West smackdown. Forget Britney’s panties, Paris’ jail stint, and Marie Osmond fainting on Dancing with the Stars. The year’s biggest entertainment story this side of Hogwarts might’ve well been Halo 3.

On Sept. 25, 2007, Microsoft’s M-rated video game was released to critical raves and a breathless public. During the next 24 hours, Halo 3 accounted for $170 million worth of business—tripling first-day ticket sales of the year’s most successful movie, Spider-Man 3. In the first week, it earned $300 million.

“Interactive entertainment never will be the same,” declared Toxic Shock TV.

The release was, in a sense, the gaming industry’s coming-out party—a cultural milestone that cemented the arrival of video gaming into the mainstream and proof that virtual entertainment can be just as influential—and lucrative—as anything in media today.

Not that the industry really needed more proof. Consider:

            * The gaming industry earned $31.6 billion in 2006—more than the gross national product of Luxembourg.

            * More than 8 million people play the online role-playing game “World of Warcraft,” with each player shelling out $15 in monthly fees to play and often spending hours at a time in its universe.

            * Virtual worlds for children, such as PenguinClub.com and subeta.org, charge kids (or their parents) for virtual doodads with which they can decorate their virtual pads. In other words, they’re shelling out real cash for imaginary products. (Click here to learn more.)

Virtual entertainment isn’t new, of course. Anyone under the age of 40 likely has fond memories of Pong, Pac Man, or the Mario Brothers; and many can remember donating shovels full of quarters to the local arcade. These days, every blockbuster movie spawns a video game; and, occasionally, video games give birth to movies. Tomb Raider anyone?

But a video game outgrossing the year’s top film? It’s a sign that the gaming industry is more than an influencer: It’s a media superpower, and it’s broadening its appeal by the day.

Going GaGa for Gaming

Video games aren’t just for teen boys with tape around their glasses anymore.

MediaWise’s latest video game report found that 86 percent of kids between the ages of 8 and 16 play video games at home. Hardcore gamers are often in their 20s and 30s now, and PBS reports that more girls play Web-based games than boys. More games are being designed for girls, too.

Nintendo’s innovative Wii is further mainstreaming video games by targeting casual gamers and dispelling the notion that games are best played sitting down. Players swing the Wii’s motion-sensitive controller as they would, say, a golf club or baseball bat, forcing them to move more than just their fingers. The Wii and its stable of casual, family friendly games has roped in non-gaming parents and grandparents; the platform is even being used as a fitness aid in some health clubs.

While the gaming industry is thrilled with its own popularity, others aren’t quite so enamored with the entertainment medium. While the Wii controller might serve as a bowling ball in one game, it can just as easily be used as a sword—or an axe—in another.

When Manhunt 2—the gaming equivalent of the Saw movies—was released on Wii, some wondered if it was a sign of cultural Armageddon. The idea of using that cool little controller to stab, hack, and bludgeon CG opponents—as players are required to do in Manhunt 2—set off plenty of alarms.

In truth, it was only the latest squawk in an ongoing debate over whether games like this are actually dangerous.

“A well-designed game is an excellent teaching tool,” said Craig Anderson, a professor of psychology at Iowa State University who has done several studies on violent video games. “Basically, whatever you practice you get better at. The question parents, and society in general, need to ask is what kind of skills we want our children learning.”

Investigating Violence

Anderson says his research, and the research of other scientists, definitively shows that playing violent video games can heighten a player’s aggression and proclivity for violence. Though playing Halo one night won’t necessarily lead to a school shooting the next, it can be a “risk factor,” much like being obese can increase the risk of having a heart attack. In fact, a chart in Anderson’s book Violent Video Game Effects on Children and Adolescents (co-authored by colleagues Douglas Gentile and Katherine Buckley) suggests video games are a better predictor for violent behavior than poverty, substance abuse, or coming from a broken home. In the chart, only gang membership was listed as having a higher risk factor.

Some say such hand-wringing is unwarranted. PBS reports that studies on violent video games often come up as inconclusive and that “many have been criticized on methodological grounds.” Gaming proponents argue that violent crime has gone down since the advent of video games and that playing violent games can even be cathartic.

Hogwash, Anderson says.

“In the hundreds of media-violence studies that have been done since the 1950s, there is no evidence that exposure to violent media reduces later aggressive or violent behavior,” he said. “I wish the catharsis myth were true rather than a myth, because it would lead to a much less violent society.”

Impact on Life and Relationships

Critics have other concerns. Games can be so engrossing that it can disrupt a gamer’s real-life, um, life. A study done by the Palo Alto Research Center showed that it takes the average World of Warcraft player about 372 hours of gameplay to reach level 60 in the game: That’s more than two months’ worth of eight-hour workdays. Clever game design constantly encourages gamers to play “just a couple more minutes” to pick up the next reward—breadcrumbs on the path to gaming marathons (www.nytimes.com/2007/10/27/arts/television/27hell.html). There’s even a site for suffering folks whose spouses are “addicted” to games (www.gamerwidow.com).

“They risk their health, their family life and their lives,” founder Sherry Myrow told Fox Business. “They risk everything to play the game. That’s when it crosses over from a pastime to a full-blown addiction.”

As problematic as it can sometimes be, this devotion helps ensure video games will be a power player for the foreseeable future. In an era when music sales are dwindling, television audiences are fragmenting and the movie industry is in a perpetual state of hand-wringing, video games are the entertainment world’s prime growth industry, expected to grow more than 9 percent annually for the next five years, according to BusinessWeek. As technology moves forward, the games themselves are becoming more creative, compelling, and artistic. Many come with breathtaking visuals, sophisticated plots and, occasionally, provocative moral dilemmas.

In the dark-but-critically acclaimed game BioShock (rated M), players must decide whether to rescue little girls from the clutches of their horrific captors or (gulp) “harvest” them for the special powers they carry. Though it’s possible to “win” either way, how you choose to play the game impacts how it ends.

Some game designers are crafting games to address real-life problems. Darfur Is Dying places the gamer in a refugee camp, where the goal is to gather food without being attacked by militia. In ICED, players are illegal immigrants trying to make their way in America and avoid being deported.

Traditional games have benefits, too. “A well-designed video game is inherently an excellent teaching tool,” Anderson said. The best games, he says, can actually teach players how to better interact with one another and encourage positive behavior.

They can be fun and frustrating, controversial and captivating. And video games will continue to be a major influencer of youth for years to come.