The act of installation is generally defined as the transfer of a substantial portion of a game's content, or the entirety therof, onto a storge media inside the machine.
Installation has been a part of gaming for a long while on the PC. When games became too large to run on one floppy disk, games like Metal & Lace: Battle of the Robo Babes would ship games on multiple floppies. Installation became even more necessary when games moved to CD-rom, as file compression and multi-disc games combined with the non-writable nature of CDs made installs needed.
Until recently, installation has not been an issue with console games, which are streamed off the disc during play. However, larger, more complex games have made streaming the game in traditional manners impractical. This has necessitated the inclusion of hard disc media in next generation consoles.
On the consoles, installation happens in two ways:
The game will play as normal without an install period, but data that is used often will be cached onto the hard drive, resulting in a smoother experience. One need only compare playing The Elder Scrolls IV: Oblivion on an Xbox 360 with a hard drive versus without. Drive Caching reduces load times, making a game run smoother, even if loading occurs frequently. This is often seen on the Xbox 360.
This is basically the same as PC installation. Before playing, a large chunk of game data is dumped onto the console hard drive. This can be a voluntary installation, such as Time Crisis 4, or a mandatory installation, like Metal Gear Solid 4: Guns of the Patriots. Usually, installations are five gigbabytes and can take up to a half an hour. The disc still has data that is requred for running the game, and thus must remain in the system during play.
Critics of installation argue that the large time frame an installation requires hampers the enjoyment of the game in those first moments of bringing the game home. Console gamers in particular feel as though this is part of a merging of console and PC gaming. Others argue that installation can be intimidating for newer customers. Microsoft has also expressed this concern as well, and has tried to advance a more intuitive installation. Their stated goal is for installation to happen in the background while players are watching introduction cinemas. Halo 2 for Windows Vista attempts this "invisible install" as an option.
Another concern is space. Someone with multiple installations on a console with a twenty or forty gigabyte hard drive are unable to hold many installations, and thus will be forced to erase and reinstall as he or she switches between games, with the only solution being the purchase of a more expensive hard drive with more space.