Gamasutra - DICE on Developing Narrative
A panel at the DICE Summit featuring BioWare's Ray Muzyka and 2K's Ken Levine on developing narrative has been covered at Gamasutra. I don't think any new territory was really explored but it might still be worth a read:
Muzyka says that many of the modern gaming narratives lead players, but still allow them the freedom to diverge from the story. "It flows, but it's still directed. Two of my favorite games this year, BioShock and Call of Duty 4 are a more directed experience... a tight, polished experience in a narrative flow."
These kinds of storylines are expressed through observations, gameplay and actions, subtle factors that can shape the narrative. "In BioShock, the narrative is expressed in an observant way that you might miss it... but it's a watercooler talk thing, you can discuss it."
Muzyka also speculated that increasing realism and the use of actors and lifelike digital models make story more about fulfilling emotion.