Warner Brothers was the only Hollywood studio to maintain independence during the Depression, and they did so by appealing to everyone's desire to visually escape from the drudgery of daily life at the time. This is essentially the same method used by the Catholic Church during the Dark Ages, when cathedrals were the only place one could go to see a visual simulation of what Heaven might look like to a populace riddled with poverty. Screwball comedy poked fun at the foibles of the rich to show poor people that money didn't necessarily make one happy.
The point I'm getting at here is that escapism works, quite literally, as an escape from real world ills. Video games don't necessarily do this. If we sought an escape from violence and terrorism, then we wouldn't have so many video games on the market focusing on just these two issues. Rather, many video games seek to provide catharsis for the mental ills that plague us all. We don't see games about Iraq, but there are plenty of games that attempt to deal with the same "forces of evil" that fearmongering pundits fill our heads with through metaphor or displacement.
Even Mario wages [a] battle against the totalitarian, (literally) draconian Bowser. Americans don't like seeing freedom, safety, and capitalism toyed with (and the Japanese are happy to produce games that reflect our values exactly). WWII games used to be the most common FPSs besides scifi-themed shooters, but recently we've seen a market influx of "modern" shooters - Call of Duty 4: Modern Warfare being the highest-quality example. If game company marketing departments advise against addressing current political situations directly in war shooters because of fiscal considerations ("we don't want to alienate half of all potential buyers"), then we have a self-enforced limiting influence similar to the mainstream news propaganda model on our hands. I'm not saying that the cause is the same (government control), but the effects certainly are (avoiding sensitive subjects through a given medium).
I do think there is something unsettling about the kind of shift from WWII shooters we've seen towards games positing Russian and Mexican terrorists as the enemy. One would do well to remember how quickly the American propaganda machine shifted from vilifying Germany to declaring a cold war on "Uncle Joe" after Berlin's surrender. When you listen to any right-wing radio personality talk about his "solution" to our present sticky international relations situation, he reminds us that propaganda was essential toward the goal of hardening American hearts toward its enemies during and after WWII. CoD4 is particularly troubling because it posits Russian terrorists as having a controlling influence on Middle Eastern militants (this is actually a complete reversal of the truth of our having financed Bin Laden and others in their struggle against the USSR).
Currently we're on the brink of seeing yet another cold war against Russia (our politicians use the war on terror to obscure this fact), and the "looming threat" of cheap foreign labor (particularly Mexican, on our own soil) troubles a majority of working class Americans. Both CoD4 and Battlefield: Bad Company deal with Russian enemies, while Tom Clancy's Ghost Recon: Advanced Warfighter I & II deal with terrorists on the US/Mexico border. All four of these games are both well-made and wildly popular; however, we must ask the question as to what it's doing to our subconscious thoughts about foreign policy when we play games where we have to battle Russians and Mexicans instead of extremist Muslim terrorists. Are we not priming the minds of teenaged players toward future conflicts with these countries under the guise of avoiding touchy "real" military engagements?
[ADDED: my upcoming posts for the winter break]
1. Clarification and Correction Follow-Up to this post
2. Indie Games, News Games, and Documentary Film
3. Possible Reasons to Ignore Journalistic Values with Games
4. Richard Bartle's Idea for Breaking News Games
5. Undecided News Game Review