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The Making of Dungeon Siege
Over at Rock, Paper, Shotgun Keiron Gillen has a writeup he did back before the original Dungeon Siege released. Something of a post-mortem, he and designer Chris Taylor discuss what makes the mostly traditional hack n' slasher unique. "Technologically speaking, the most distinctive element of Dungeon Siege was how it streamed its levels. Throughout the huge world, there wasn't a single loading pause. 'When you're in a fantasy game...' Chris reaches for a metaphor to explain why this is so important, 'Well, imagine if it's a movie, and if you have to change the film every ten minutes, you wouldn't be able to immerse yourself into the Fantasy. By eliminating loading screens we were able to keep people in the game, and much more immersed in this world. You become one with the game. You could melt into the monitor and the keyboard and the mouse.'"
This is the same technique that Metroid Prime has used. Large areas are connected by small hallways to allow the next area to begin loading. Sometimes you reach the next door before the area behind it is loaded and it refuses to open for several seconds. The same thing still occurs on the 3rd installation for the Wii released last week. It actually seems like a bug if you do not know why the doors fail to always open immediately.
World of Warcraft is a pretty good example of how loading screens can be (mostly) avoided. The game world is huge and you can travel from zone to zone seamlessly.
Actually there are loading screens between the three 'continents' (Outland isn't really a continent), and between the main zones and instances, but even then the loading is pretty quick. I guess Blizzard thought the lack of loading screens (and hence a more immersive world) was more important than bleeding edge graphics.