Execution is the key to success when attempting to accomplish anything. The best laid plans fall to the wayside unless they are executed properly. Be it sports, writing, film-making, or the implementation of sex in video games - execution is what makes the difference between having a meaningful piece of entertainment or a poorly composed mistake. The topic of sex in video games has been front and center in gaming news recently with the #1reasonwhy twitter campaign and, as mentioned by Sir Dixon, the Dead Island: Riptide marketing debacle; the question of whether it even belongs in video games has been brought to light.
Jim Sterling's article on the Dead Island Collector's Edition: http://www.destructoid.com/dead-island-riptide-zombie-bait-edition-is-turbo-gross-242451.phtml
Never has sex been the reason for why I've bought a game, or even for why I watched a movie, but it can add that edge that so many people crave when watching, reading, listening, and playing. But, when approached in an inappropriate way, it can come off as pornographic and can even be offensive to some people. There is a place where you can get that style of entertainment if you're looking for it --it's called pornography. The same can be said about unnecessary and over the top violence; with movies like Hostel, the Saw sequels, and the Final Destination sequels - overly gruesome violence with no context can dumb down any entertainment experience. These "one-trick pony" forms of entertainment have their place, but don't satiate the appetite for a more "complete" form of entertainment that a well-executed film, novel, or video game can provide.
So, sex is not necessary for media to be entertaining, but when executed properly it can add substance to scenes, story, or gameplay. In regards to games, that doesn't mean button mashing the X button to pump faster, no, it means implementing sex in to a game to create an engaging story element or gameplay scenario; much like in Mass Effect. I have not yet played Mass Effect, but I witnessed my best friend playing out an intimate scene with a female counterpart that he had been trying to entice into love-making for three full playthroughs - without any success. The game simulated a quickening heartbeat and built up the tension during key dialogue tree sequences that -depending on my friend's choices- would determine whether or not he would be with the girl of his virtual dreams. I wasn't even playing, and had no knowledge of the two characters' relationship before this moment, but the excitement/anxiety of my friend was infectious and had me cheering him along. He did finally succeed, and it was a very cool moment to experience; not because it was about sex, but because it was executed well with great storytelling, the right amount of player involvement, and a level of suspense and excitement that accompanies great moments like this.
Moment to moment, a game can use sex effectively, but a video game in its entirety can also be sexy. Now, certain games tend to veer off the beaten path and fall into sexist cliches that can hinder the appeal of a game; and those games tend to steal the spotlight. Games like Bayonetta, Lollipop Chainsaw, and Dead or Alive have garnered attention when they seem to over sexualize their female characters; be it with skimpy outfits, disproportionately curvy body parts, or entire development teams devoted to boob physics. But games that use sex subtly are the most effective, without compromising the overall experience. The love triangle between Elena, Chloe, and Nathan in Uncharted 2 is an example of what makes a game sexy. These three characters had outstanding relationships with each other, whether it was purely physical or something deeper, there was a sense of history and meaning behind their relationships that really made all of their scenes sexy and appealing.
Courtesy of Kirk Hamilton at Kotaku. http://kotaku.com/love_triangles/
In the end, it all comes down to execution during implementation. Quentin Tarantino has plenty of violence in his films, but they work so well because they have context and add to the story. The 40-year old virgin handled sex in a semi-mature, yet funny way which also made it more intriguing to watch. And The Witcher 2 may have surprised you during the first appearance of digitally rendered wahoos, but the human body is a real thing that we shouldn't be afraid of, and The Witcher 2 never crossed the line into inappropriate territory. So, as long as sex is handled in an adult, innovative, and tasteful manner that adds to the overall experience - there is no reason why it can't be in video games.