Sometimes the language is used for shock value, but for the most part it usually serves the story. Each year game companies test the censorship waters by seeing just how far they can go. For a while it seemed that one game, Soldier of Fortune may had gone too far. Due to very graphic and realistic imagery depicting all sorts of horrible and painful deaths and dismemberments, this game was literally banned from software stores in Canada and forced to be sold as adult entertainment putting it in the same classification as pornography. That ruling was recently overturned much like the Indiana statute that had arcade owners hiding their M-rated video games in private areas much like the adult section at a video store.
Cultural differences play a big part in video game content.
A large percentage of the games we play in the states originate overseas where concepts such as sex and nudity are commonplace on their TV and their games. We live in a world of violence with cops and robbers and terrorists. While I doubt that too many kids would tell their teacher they want join organized crime, steal cars, or become a professional hit man when they grow up, it sure might be fun to explore these opportunities in a harmless outlet such as video games. Video games don't cause violent behavior or train our kids to become criminals, although most adults would have you think so. If you ask most kids, playing Quake or any other violent game they will tell you it is a great way to relieve stress from the pressures they are subjected to in school and in their daily life.