the age has a good article about John Buchanan (professor from Carnegie Mellon's Entertainment Technology Centre in Adelaide). Some excerpts I found interesting here:

"The video game industry has reached a point where its success is strangling innovation within the field. Developing games is now a high-risk endeavour. The cost of prototyping becomes expensive because of the technology needed to build it. When interacting with characters in a video game, their behaviour is scripted and hard coded. Programming the behaviour (by) anticipating for all possible scenarios makes it very expensive. The cost of failure is expensive, we need to fail cheaper."

His latest idea to keep costs down is game sketching, through which his team builds tools that are used in puppeteering to build a game idea.

"We use a puppeteer, an actor who sits in front of a computer and reacts in real time to what the guest is doing," he says.

"People with a game idea can send us a script and we can play through the sketch of the game. The guest can interact with the experience of the timing of the events of the game."