I think it is oft-under-utilised!!!!!!!
sonic the hedgehog is one of the only games who still dares to have sung vocals in its themes, often kicking in during the final boss battle, in a moment of high-camp cheese- and the thing is, that's actually pretty cool! ...cheese is cool if you EARN it. which recent sonic games tend not to do.
when earned, the vocals-kicking-in-in-final-boss-theme absoltuely brings it home, but it's such a hard one to nail it perfectly
I think vocals are considered distracting in in-game music when the player is just going about their business but I think more game developers should dare to do it and to experiment
Metal Gear Rising: Revengance has lyrics to its boss themes, which typically kick in during climactic moments of the fight, during moments of dramatic importance. This makes Metal Gear Rising: Revengance a musical.
