The tablet game market is expected to grow to $3.1 billion worldwide, according to a new report from analyst firm Juniper Research.

The spending on tablet games is expected to account for a third of all mobile game revenue by 2016, when total mobile game revenue is expected to top $18.3 billion.

For 2011, Juniper estimated tablet game revenue to be $491 million. The report says the large screen size and outstanding graphics will motivate users to buy games and in-game items such as virtual decorations. The tablets are particularly appealing for fans of hardcore games.

Tablets such as the iPad are selling for $500 or more, but the prices are dropping. In 2011, tablets sold 55.2 million units, up from 17.6 million, according to Juniper.

Revenues from games for tablets are coming from a variety of business models, including pay-per-download, free games with ads, free games with brand presences, free Lite versions upgradeable to paid, and a free-to-play games with in-app purchases.

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Charlotte Miller, author of the report, said, “The tablet is the perfect device for playing mobile games — the screens are large enough for the user to see the action, no matter how big their hands are. Tablet owners also tend to have a larger disposable income, as tablets are often bought outright rather than subsidized by operators. Higher user satisfaction with games and a bigger wallet mean that tablet games look to be highly lucrative.”

The report also identifies challenges including overcrowded app stores, tiered data plans that discourage heavy usage, operating system fragmentation, partial network coverage, piracy, and content regulation.