The latest show of climbing video game sales came in April’s 47 percent year-over-year increase. The $1.23 billion in game & console sales was buoyed by continued success of the Nintendo Wii, as well as the release of the hotly anticipated Grand Theft Auto IV.

As this usage continues to climb, there are also developments from marketers looking to capitalize on the high engagement and repetitive use of video games. With lots of talk of product placement and contextualized ads on television, it’s natural that this discussion should continue on to video games where thematic content lends to contextual relevance.

We haven’t seen much action yet, but things are pointing in that direction. Microsoft bought in-game advertising company Massive in 2005, which indicates the possibility of more interactive advertising in Xbox games. Backing this, Microsoft Chief Advertising Strategist Mike Galgon recently told us in-game advertising will be an area in which Microsoft will diversify and differentiate itself beyond search, where Google has established dominance.

We also heard earlier in the week from Marc Andreessen, who contended that while nearly all forms of offline media revenues are declining, the only ad markets that are growing are online and video games. This will mostly open up to brand advertising and placement, at least in the short term. Meanwhile, gaming’s popularity has molded other product development, including local. 3-D mapping and metaverses, most notably Microsoft’s Virtual Earth 3-D have a gaming feel to them (VE3D can be navigated with an Xbox controller).

You can picture future local search products involving more immersive mapping, including the street side views demo’ed by Microsoft’s head of local, Erik Jorgensen, at Drilling Down on Local. Once you go from two dimensions to three, new forms of advertising open up, including transactional revenues from booking hotels, vacation destinations or restaurants. EveryScape is building its model around this concept, while popular games like Grand Theft Auto have settings based on real U.S. cities (i.e., Vice City, San Andreas, Liberty City).

We’re not seeing much use of local search metaverses yet. Indeed, Microsoft’s 3-D mapping product is a bit ahead of its time. But with telecom high-speed fiber network rollouts for IPTV, a byproduct will be capability for other bandwidth-hungry applications like this. And most of all, these local search products are intuitive for a generation of gamers.

In other gaming news, Georgia is pushing hard to attract gaming companies, and for games to take place there. CNET put it best: Maybe next we’ll see Grand Theft Auto: Atlanta.