One way how they make games seem like they are more natural in the way the characters react to you and how your choice affect the world are the systems used in Peter Molyneux's games such as
Black & White and
Fable. In both, rather than a set Good, Evil or possibly Netural representation of yourself, you have a sort of sliding scale which is adjusted by the actions you take, and rather than that actual slider being displayed in some character status screen is manifested in the way your character appears in-game.
It's a nice idea, but still isn't that far away from the good/bad choices, or the system of alignment used in Dungeons and Dragons and this is true of most games, even those with claimed advanced AI.
For starters, the actual choices are still for the most part just the same - sometimes there's a moral dilemma when you pick the lesser of two evils, or there's a choice that's not necessarily between good and bad but will quite obviously affect something like how much money you get - but for the most part it's a good/evil thing.
Then, there is the way that games don't generally tend to
learn what you're trying to do. They might pick up that if you've joined the Guardians of Justice that you might want to receive quests which about upholding the law, but they rarely offer you quests out of the blue which are based on your past exploits, and anything which falls outside the parameters set by the quest are ignored - the game won't notice if you only do quests given to you by attractive females, nor if you turn a blind eye to lawbreakers from your own caste/species.
One way they could simulate this programmatically is to have sliders for a multitude of things you might be able to change through your actions, such as how you get on with the other races/classes in the games, or how much you favour a stealthy approach - then to give all quests a weighted modifier to these slider values (where appropriate) and adjust them not only upon quest completion, but as you do the quest in a certain way. Then future quests could be granted/modified to suit the way your character turns out, and NPCs could greet you with a more realistic-seeming recognition of your talents.
While this might give a more organic feel, it is of course still quite mechanical and only a simulation of what you might have been thinking as you took certain actions. It seems a bit like - although I'm no expert - the science of psychology seeks to do, which unlike psychiatry doesn't focus on diagnosis of an individual but tends to compartmentalise based on observations of other test subjects. I think free will and whimsy are beyond what can be simulated, though - so all we can hope for is a 'best guess', as people we don't know for sure what's going on in each other's heads, so we can hardly expect a machine to.