Do interactive games encourage literacy?

This is a question I always wanted to know about. If educational games enhance learning, or if they only enhance memory within games. And if so, at what age does playing with educational toys and games help? I understand trivia to develop memory and vocabulary skills, but what about other games? The thing is that, of course, life isn't a series of video games (at least, not yet). If k-12 education is completely devoted to play, how are we preparing students for college? The workforce? Life? This guy claims that they do work (based on his daughters, he even provides a really cool graphic). But what EXACTLY are they learning? If the answer is simply vocabulary, and random information, then media provides that. Perhaps there's no teacher like human social interaction, at least at a certain age, and a formal classroom. But who knows?