Entertainment, I believe, is fairly recession-proof, but not completely. For the video games industry in general, a slowdown in the US economy would probably affect it slightly.
For hardcore gamers, I would expect spending to drop, as this is their primary form of entertainment, therefore the primary flow of funds. But for the casual gamer, I would expect spending to rise as money that would have been allocated to a night out on the time town w/ movie + dinner (I think the average is around $75-$100), or a vacation, or an expensive luxury item would be reallocated to cheaper entertainment alternatives. One of them could be video games. True they still wont spend anywhere near what a hardcore gamer would spend, but I think it is fair to say that when most people buy a game, they expect to be entertained for a long period of time (mine is about 30-40 hours). Therefore, I would imagine, video games would slowly creep up the list of viable entertainment alternative compared to the more expensive ones. I am not saying it will outright replace those alternatives, but it would definitely be considered by more people.
I think where the recession would hit the video game industry hardest, are companies/publishers/developers, who produce games that are of poor quality. Top notch games such as GTA IV or COD 4 or Rock Band, should not see any decrease in sales, as the return on fun factor for the amount paid is too great of an value. But games that do not meet the higher quality standards would get extra scrutiny and be hit much harder. People are holding on to their money tighter and would not part with it unless there is an actual value proposition.
In a sense this might be even better for the gamers as a whole. The developers/publishers/producers who keep creating shovelware might be shoveled out since people dont have the money anymore to buy extra games.
