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Smeags said:
I'd go for the latter. I've never been a huge fan of cut scenes in a game, and I always appreciate it when a developer implements the story or important information in the actual game as you're playing it. Audio Diaries in Bioshock, Scannable objects in Metroid Prime... these are great examples of creative storytelling.

Speaking of images on walls telling stories, Sonic & Knuckles is another great example:

 

Win!

 

Since when does Lambda represent decaying life? I never heard that before now... is it just the meaning in Half-Life?

 

Considering I haven't played Half-Life, that image really doesn't do much for me. Your second image is a better example I think, but I don't look at it and think it's telling much of a story. Maybe if it was a real crack instead of just an artificial one, I would think of it as a better story.

 

I'm going with the video for these particular examples.