Episodic content is when the publishers of a game decide to release a game in multiple parts or episodes. Episodes are usually shorter than full games and not as expensive. Usually once all the episodes are out, the publisher releases a package with all the episodes.
One notable advantage of episodic games is the ability for developers to take aboard feedback from players and critics, then apply this critique to subsequent episodes.
Episodic content could be said to have originated as far back as 1979 with Dunjonquest. Later on, this would be popularized by Apogee (now known as 3D Realms). This company began distributing their games in episodes, offering discounts to people who bought multiple episodes at once. It would give out the first episode for free, then make the customer pay for the rest.
Around 2005 Valve became very interested in the idea of episodic content, announcing that Half-Life 2 would be followed by several episodes released on a semi-regular basis. Along with this, Valve announced a revival of Sin, which also was to be released in episodes. Half-Life 2: Episode One was released in summer 2006 while the next episode was not released until fall 2007. A third episode was planned, but as of 2016, it still has not been released. As for Sin, one episode was released before being abruptly canceled.
Telltale began making episodic adventure games in the Sam and Max franchise. The episodes were received positively (and were released on a relatively regular schedule). Following on from this, Telltale created two more seasons of Sam and Max games as well as numerous other critically acclaimed episodic titles.
Sega attempted the episodic model with Sonic the Hedgehog 4. The "season" consists of two episodes which were released two years apart.