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In an ideal Ayn Rand-ian world, the good guys are pretty, and the bad guys are ugly. The internal beauty of virtue and wholesomeness manifests itself on a perfectly flawless external visage.
Conversely, the baddies have scarred, twisted features. The rare smile of a villain is not a product of happiness but malice. Games used to be this clear-cut. Games used to be this black-and-white.
Now, however, game developers have the technology to make their characters actually look human, as opposed to being mere embodiments of ideals. This helps gamers empathize with their increasingly realistic in-game avatars; but this shift away from a black-and-white game development ideology did not happen overnight.