Nudity in video games is something that is not taken lightly by the ESRB. Most games that feature naked breasts are rated M. Very few games show full frontal nudity, and most of those games are rated AO. That's why when a developer wishes to show a character naked on screen without really showing him/her naked, they conveniently obscure the nudity with objects.
This technique usually involves objects that are lying around the environment such as vases or other characters' heads. The camera is set behind said object and lines itself up so you can still see the naked character but not his private bits. This technique can be used for comedy, especially when a man is naked. His penis can be obscured by some sort of big stick or something that would suggest that he is erect. This is a recurring gag in the Austin Powers films. In Grand Theft Auto: Episodes from Liberty City, Rockstar played with this concept by having a scene where a naked senator (Tom Stubbs) walked around, each time his genitalia being concealed by an object in his apartment. But at the end of the scene, when the player least expects it, the camera is unable to conceal the senator's nudity, giving the player a nice long look at the politician's bottom bits.