[PeterStuer]

You don't optimize for competitive performance (it is trivial to design a game AI that beats every player every time given that you have control over tilting the playing field). You use the AI for bounded response variations (all NPC's act 'natural' and different from the others) and engaging procedural generation (Here is a chapter of a story, now draft an entire zone with landscape, NPC's, cities, quest story lines, etc.).

Games like PvE MMO's need to find a way to produce engaging content faster than it can be consumed at a pricepoint that is economically viable. The way they do it now is by having the players repeat the same content over and over again with a diminishing returns variable reward behavioral reinforcement system.

[antris]

One of the design goals of game AIs is also that they are fun to play against. If they are too smart and coordinated, they try to throw you off in a way that feels "unfair" to the player.

You have to hit a spot where they are sometimes a bit surprising, but not in a way that cannot be reacted to quickly on your feet. This throws realism out of the window.

[wtetzner]

But why would good game AI have to make the characters better than the player? The focus on NPC AI should be to make them interesting, not necessarily really tough opponents.