I'm going to act like I'm a shitload more insightful than everyone else in the video games industry, and tell you why I think it is completely screwed up. You would think that the people who make the decisions would be better informed than me, and be able to work things out themselves, but apparently this is not the case.
First of all, the average video game player is between 14 and 25 years old, at least in my experience (though it's always the fucking annoying, whiny 12 year olds with alternate caps names that piss you off the most). A significant portion of that group is below 18, and an even more significant portion of that group is comprised of lazy fucks.
Basically, what this means is that people (a) can't buy stuff using a credit card (under 18) and (b) cannot be fucked going out to a shop to buy stuff. (Let's leave aside the issue that many of these people are also stingy fucks.)
So overall, this puts us in a fairly difficult situation if we want to sell people video games. What makes it worse is that these people also tend to be very computer savvy, and know just where to get a pirated copy of that video game from.
The current situation is (or so I've heard ;p) such that if you have a relatively fast internet connection, you can find pretty much any reasonably popular game you want within 10 minutes, and download it for free over the next 24 hours (of course, breaking the law in the process, but the internet grants anonymity and we all know how that makes people less likely to consider something as morally wrong, not to mention the fact that it's unlikely that you'll get caught). Typically, once you've downloaded the game, you can burn an exact copy of the original game disc, mount it as a virtual CD, or use a no-CD crack - basically, this means you can play the game the way you want. In the overwhelming majority of cases, the legal course of action involves you going to a store, paying AU$60 or more, going back home, spending half an hour installing the game (from a relatively slow DVD drive), and when the game has copied all the necessary files to your HDD, you still need to insert the disc to get it to run. If you lose the disc, you can't play.
Having to swap discs in and out of the drive all the time is a total pain in the ass. However, there's one situation where the pirated alternative pales in comparison to the legal avenue: you are usually not able to play the game online, since game servers feature some sort of check to ensure that you're using a legitimate copy of the game or legitimate CD-key, et cetera. However, you end up being able to play the entire single-player campaign, if there is one, for free, and you can still play LAN games. (Go to a LAN and tell me how many people you see swapping CDs in and out of their computer so that they can get past all the CD checks.)
The best way to go about things currently (of course, ignoring all legal/moral matters) is to pirate the game, and then if you enjoyed the single-player campaign and LAN gaming (try Hamachi if you want to play "LAN" games over the internet), buy a CD-key off eBay or similar for ~$15 (which was probably obtained by a disgruntled store clerk who looked inside the game boxes after closing time, and fucks up someone else's multiplayer experience when they get kicked for shared CD-key after buying a legal copy of the game). That way, you don't waste any money on a shitty game (*cough* EA's James Bond games) and in the end, you spend a lot less anyway.
And the only legal option that comes close? Anything that runs on Valve's Steam platform. As much as I fucking despise Steam, what Valve has done is really forward-thinking, in my opinion. You download the Steam client (free) and register an account, then "activate" games on it with your credit card (a flaw in the system that still needs to be addressed, there should be another way to pay). Once you've done that, you can download them from Valve's own servers at decent speeds. No bullshitting around with stores and installing crap off CDs, and you have the added "advantage" of Steam keeping all the games it manages up-to-date.
Unfortunately, this model doesn't work for anything other than multiplayer games. The problem (or to some, best part) with Steam is that if one of your friends owns a copy of, say, Half-Life 2 (single-player only) you can simply log onto their account, download it from Valve's own servers (a really convenient way to pirate games) and play it. In fact, your friend won't even notice the difference unless you try to play the same game as them online at the same time (eg. Counter-Strike: Source). However, the single-player game still works fine. Or if you're such a cheap bastard that you can't even afford to split the cost of the game across however many people will share the Steam account, there are a multitude of cracks that (to varying degrees of success) allow you to do the same thing.
Basically, if you want to sell a single-player game, you're pretty fucked. I'll post back here when I magically solve the problem. Unfortunately, single-player games can't rely on external servers most of the time, so in the end, anti-piracy measures can just be hacked out. The only solution seems to be something in the realm of loading a small amount of data externally - without which the game is almost unplayable - for example, in a GTA-style game, an external server could randomly tell you which cars will spawn (eg. 55 means "spawn a Banshee"). The amount of data used should be minimal - such that the company can afford to run the game without regular fees - but you wouldn't be able to patch out the "phoning home" part of the game (during which your CD-key would be checked). Unfortunately, there is no way to do this without alienating the offline community, and I suppose it would just drive people to play console games instead. (Console games! Nintendo's disc format for the GameCube seemed to have worked really well in preventing piracy. I wonder if there's a way to transfer this to the PC - probably not, since you have so much more control over a PC than a console..)
Where am I going with this? Well, I forgot. The point is that at the moment, downloading shit is just way more convenient than going out to the store, buying it, and then having to contend with all the stupid anti-piracy bullshit. (Now that I think of it, it is interesting to note that the only way to get rid of said anti-piracy bullshit is to use a pirated version.)