Game Politics has an interesting entry about infamous anti-game attorney Jack Thompson's allegation that he is depicted in Grand Theft Auto IV (currently under development).
Thompson says (based on an article in a game magazine) that one of the game's missions involves the assassination of a lawyer who, when confronted by the player's character, says things such as "Guns don't kill people. Video games do." Thompson says that this lawyer is clearly meant to be him, and has demanded that Rock Star and Take Two remove all references to him from GTA IV before it is released (see copy of Thompson's letter on Game Politics here).
This situation (regardless of whether it is all accurate) raises interesting issues about the portrayal of real people in video games. Note that all of these discussions depend on there being a recognizable depiction of a real person -- having an in-game character who is a lawyer who says that video games cause violence is not necessarily the same has having an in-game character that is recognizably Jack Thompson.
In many jurisdictions people have rights in their personalities, and including a person's likeness in a game without permission may violate those rights -- for example, by suggesting an affiliation or endorsement that doesn't exist. If I appear in a game, people might logically think that I support or endorse that game.
Including a real person's likeness in a game could also involve defamation -- for example, if a game included a recognizable likeness of me doing something objectionable, I might have a claim that the depiction was harmful to my reputation.
Another issue -- the one Thompson raises in his letter to Take Two -- is personal safety. If a game involves violence against a game character that is recognizably a real person, might that game be seen as encouraging or inciting actual violence against the real person? The connection between general violence in games and actual real-life violence is a common topic of discussion and study (with no clear causal link yet demonstrated so far as we are aware). But intuitively it seems to follow that if a game involves violence against a specific recognizable person, there might be more likelihood of actual violence against that actual person. Such activity might raise issues under both criminal and civil law.
It's not clear whether Thompson's claims are accurate, or whether the final version of GTA IV will actually involve a depiction of an anti-game lawyer. But the issues are interesting, and demonstrate that depicting real people in games (or movies, or TV shows, or books) should not be undertaken lightly.
See the Game Politics article here.