My understanding is that the rating change was increased mostly due to the blood, gore, and Dark Brotherhood-esque matters that were overlooked in the initial rating process. However, the re-evaluation was prompted because of the nudity files, if only to avoid what could potentially be another Hot Coffee Mod scandal. The files were patched out, but the rating stayed M without Nudity as the reason.
To give some perspective, Oblivion is rated M for Blood and Gore, Language, sixual Themes, Use of Alcohol, and Violence. God of War, on the other hand, is rated M for Blood and Gore, Intense Violence, Nudity, Strong Language, and Strong sixual Content.
On a side note, I wonder why anyone can generalize Oblivion and God of War so much that they share a rating. If you look at the descriptions, they're pretty similar except Oblivion has much tamer versions of what God of War has. And yet they share the same rating, one tame game and one over the top game. Why differentiate Strong Language and Language if they both end up in the same rating? I'd prefer it if there was an actual point-based system and a clear line could be drawn between T and M. I also think that the M rating should be relaxed into two categories, one placed between T and the current M, while M-rated games in that system are strictly over the top and bordering on AO. Because in reality, there is only a one-year difference between being able to buy M-rated and AO games. Where is the difference there? Does an extra year on this planet suddenly give one profound understanding of content that they couldn't have before?
The point is that, just because something is M (or R, in the case of movies) doesn't mean you need to automatically pour in more blood / nudity / language. That's artistically bankrupt and immature. A game or movie should be designed the way it's "meant" to be.... and let the rating fall where it may.
(Ex.... you can have a drama intended for advlts, with not much cursing. You can have an action movie, intended for "young advlt males" with plenty of nudity and cursing. They're both R. But that doesn't mean the drama should have blood & language like the fratguy flick. The movies should be designed true to their purpose, not just loaded with random stuff because it's "R".)
Throwing in random gratuitous crap like that is pandering to the lowest common denominator, not making something good.
And that is why I dislike a lot of the stuff on HBO
There is, of course, slightly shifting standards for ratings over the years. Some of the stuff is subjective, some of the stuff depends on how riled up the "moral majority" has been / how much attention there is on "those nasty videogames", some of the stuff depends on evolving cultural standards. (And then, of course, there's also the "didn't play enough of the game to see that" issue. The longer a game is, the less chance there is to see everything.)
There's also some truth in this. I've noticed that the amount of M-rated games being made nowadays is growing dramatically from what it was years ago. Some things that are considered M-rated now would be T-rated 5 or 10 years ago. With that in mind though, I don't know how Portal 2 pulled off an E rating.
1. Rating can't be less than M since game is modable
Not really. There are many games that are moddable, and in these circumstances you can't put a rating on any content because it is up to the user what they choose to expose themselves to. It's almost like the ESRB rating for online play, which is to say, there isn't one. World of Warcraft is rated T, but have fun stepping into the Goldshire Inn on the Moon Guard server. Games like Spore are also moddable, before you know it crazy [male genitalia] aliens can pop up in your game without you even knowing, but the game is still rated E.