The State Of Character Arcs In Games

Another editorial on Gamasutra offers a discussion on emergent character arcs in games like Mass Effect, BioShock and S.T.A.L.K.E.R. On Mass Effect (warning, spoilers):
Mass Effect (pictured) explores player character arcs in a few interesting ways. At the beginning of the game, you choose two backstory elements (from two groups of three - your background: Colonist, Earthborn, or Spacer, and your psychological profile: Ruthless, Sole Survivor, or War Hero).

There are specific missions for some of the types, but character dialog (both your options and what NPCs say to you) is affected by all. As a Sole Survivor, I came across one more survivor of the same attack, who was killing the scientists who had let the soldiers die to study the thresher (sand) maws (worms). Dealing with him and the scientists brought a new perspective on my character's past.

By adding a layer of hidden information between player dialog choices and actual dialog & action, Mass Effect also reinforces an element of role playing that can lead to such arcs. Often it has no consequences, but occasionally there are very large ones. A friend of mine and I had drastically different playthroughs because of how we dealt with this scene.

We're not entirely sure of the exact differences, but by picking more aggressive conversation options (spoiler alert), the situation escalates until a party member kills Wrex without warning. Since Mass Effect allows a fair amount of non-linearity, in his game Wrex died fairly early, whereas he accompanied me through most of my game and I got to learn more about his character and his race.

However the exploration BioWare does into the player-character is still limited - with accordance to their style, it's very choose-your-own-adventure-y, having clearly defined branch points. So how would you create a player character arc, where the player, in the role of this character, learns something from the events they experience, which emerges from a more complex set of ongoing interactions?