Whether you think about it or not, music and sound in video games goes a long way towards setting the mood for an entire experience. An example that I always find myself coming back to is Resident Evil 4 (http://www.youtube.com/watch?v=28frFarV6oE) which I found much easier to play through certain areas while muted. Music, when combined with sound can make or break your experience in a bunch of different ways. It can and will change your perception of a game.
So what about the radio in the two recent Fallout games? Licensed music can in certain cases, go a long way towards removing you from the experience. In Fallout 3 (review on the way), the player is traversing a barren, radioactive landscape filled with grotesque mutated atrocities, land mines, and marauders who want your head on a pike. Did the experience ever feel all that nerve racking? Personally, I was too busy singing along with Billie Holiday and Cole Porter on the pipboy radio to feel completely engrossed in the experiences that my character was taking part in.
I understand the very purposeful irony of this musical selection but at the same time, was it really necessary for this type of game? It takes me out of the experience a little bit. But I don't think realism is what Bethesda was really going for. If that were me in that game, or I"m willing to bet, you, I would be gasping for air and screaming once in a while. I would shake a little bit while trying to shoot my gun at a feral ghoul running with reckless abandon towards me to snap my neck. When I'm walking around a metro station filled with raiders, it's not likely that I would keep my radio on, I would want to be quiet! Instead, listening to "Let's Go Sunning" (http://www.youtube.com/watch?v=txPqV0lZaSE) creates a feeling of "calm, cool, and collected" that I can definitely sense in the character. This mood is lighter than it could be when we are dealing with this sort of subject matter. In the near future, I'd like to see a legitimately scary survival horror style Fallout game because what's more frightening than the apocalypse?
Now of course, one could argue that if I didn't like the music, I could turn off the radio. Well, I didn't want to! Maybe semiconsciously, I valued that separation from the atrocities and monstrosities of the post apocalyptic wasteland. In the Fallout world, it is all about making choices and for me, one of those choices was to keep that radio on while witnessing (and occasionally committing) horrible acts. However you chose to play Fallout 3 or its sequel, one thing is for sure: that it was not a difficult experience to love.