I think it's all about how you spin it in, imagine:
- SimCity where you can read a newspaper about what's happening in your city that actually reflects the events that have occurred with interesting perspectives from the residents.
- Dwarf Fortress, but carvings, artwork, demons, forbidden beasts, etc get illustrations dynamically generated via stable diffusion (in the style of crude sketches to imply a dwarf made it perhaps?)
- Dwarf Fortress, again, but the elaborate in-game combat comes with a "narrative summary" which conveys first hand experiences of a unit in the combat log, which while detailed, can be otherwise hard to follow.
- Any fantasy RPG, but with a minstrel companion who follows you around and writes about what you do in a silly judgy way. The core dialogue could be baked in by the developers but the stories this minstrel writes could be dynamically generated based on the players actions. Example: "He was a whimsical one, who decided to take detour from his urgent hostage rescue mission to hop up and down several hundred times in the woods while trying on various hats he had collected. I have no idea what goes through this mans mind..."
I'm not sure if there is a word for it, but the kernel here is that everything is indirectly being dictated by the players actions and the games existing systems. The LLM/AI stuff isn't in charge of coming up with novel stories and core content, they are in charge of making the game more immersive by helping with the roleplay. I think this is the area they can thrive the most.