In general, a cameo is a small 'guest starring' appearance of something or someone famous, and not an expected occurrence. Defining a 'cameo appearance' can be extremely difficult due to the many forms a cameo can take and the many origins of those cameos. To best determine the context of each form, refer to the section titles, and within these sections the problems arising from each form can be addressed.
To better understand character cameos, it is easier to split them into two categories.
Cross-Series Character Cameo
A cross-series character cameo is when a character from one franchise appears within a game from a different franchise than the one the character originates from.
An example of this is the appearance of the character NiGHTS from the Nights into Dreams franchise within multiple games in the Sonic the Hedgehog franchise. However, NiGHTS' appearance within the Sega Superstar Tennis does not count as a cameo as it is a Sega-created character and therefore allowed to appear in such titles where a collection of characters from one or more companies come together to create such a game.
Same-Series Character Cameo
A same-series character cameo is when a character from one franchise, appears in a game within the same franchise as the one the character originates from and does not directly affect the gameplay or plot of the latter game. This means that an appearance by Marcus Fenix in Gears of War 2 is not a cameo because his role within the game, as lead protagonist, clearly affects the gameplay and plot.
An example of a same-series character cameo is the character Ken Rosenberg from the Grand Theft Auto franchise. His appearances in both Grand Theft Auto: Vice City and Grand Theft Auto: San Andreas do not count as cameos because he directly affects the plot in both and is therefore a minor character. However, in Grand Theft Auto: Liberty City Stories, Ken can be heard on the radio show 'The Electron Zone' complaining about always getting arrested by the FBI for trying to look up a few " pictures". This small role, which does not affect gameplay or plot, is an example of a same-series character cameo.
Sometimes it's cool to have a real-life famous person guest star in your game. Potentially an example of Breaking the Fourth Wall, this cameo applies if a real life person/celebrity is unmistakably represented as themselves in name and/or appearance. This can add humour or an air of legitimacy to the game. Examples are Ozzy Osbourne and other musicians in Brütal Legend, Will Wright in The Simpsons Game, or Ken Williams in Space Quest III: The Pirates of Pestulon.
Licenses that benefit from or declare celebrity involvement arguably do not qualify as cameos, such as: real athletes in sports games, musicians in rhythm games, or celebrities and their entourage in games where the title includes their name.
This is when a console or part of a console's hardware appears in a game.
An example of this would be in Halo: Reach where Xbox 360s appear among futuristic scientific equipment in a research lab during a cutscene. Another example of this is in Metal Gear Solid 4: Guns of the Patriots: when Old Snake is remotely controlling Metal Gear mk. II, the "remote control" in his hands is actually a Playstation 3 DualShock 3 controller.
Elebits featured Nintendo Wii consoles as well as Wiimotes as interactive objects in the game world.