In games like Mario, Zelda and Turok it is used to great effect, eg. in SM64 E.M. is used to make Mario look like a T1000-style metal man and also for the pools of metallic water. In Zelda, E.M. is used to model the reflective armour of knights and also objects such as swords, etc. Turok uses E.M. for the ends of shotgun shell cases which have a nice gold appearance, the rotating health powerups, the level 8 key pieces and elsewhere. Other games use E.M. too, eg. Goldeneye uses it to make some of the guns nicely metallic (Magnum, Golden Gun) and for reflective windows, etc.
The image on the left here shows a scene from Goldeneye which has a whole room full of reflective screens (the 'Complex' level); in this image, a portion of grey wall has a reflective screen either side of it. But this particular part of the room shows something interesting: as one moves closer to the screens, the right-hand screen slowly becomes transparent, but the left-hand screen does not become transparent. While this change in transparency is happening, both screens continue to be reflective in the usual way. Examine the image on the right to see the effect in detail (click on these images to download full-size versions).
Thus, effects such as E.M. and transparency can be combined to produce more complex effects, enabling one to model other materials such as smoked glass, one-way mirrors, calm lakes of water, etc. and in ways that can be made dependent on one's distance from the object being viewed; ie. in this case, the transparency of the right-hand screen is only visible when one is close to the screen.
Imagine a more complex example: an inflated, patterned, transparent, plastic balloon: the material will have transparency, a texture for the pattern, a reflective effect because it's made of plastic (or one could just use specular lighting), and probably also be shaded due to any light sources present - quite a combination of effects. Of course, combining effects in this way will require greater computation, so a games designer must decide on a trade-off between visual realism and game speed. In practice, the action in some games may be moving so fast that it just isn't worth using too many special effects since a player will not notice them.
Another point about Goldeneye: on the 'Library' level, there is an area where many small 'office' rooms have transparent windows, but the windows are also partially reflective. Unlike the images above, however, the windows in the office area are dominated by their transparency rather than by their reflectivity. This shows that a designer can determine to what degree the various special effects will decide the final appearance, how they combine, and at what distances the different effects will be prominent. Importantly, notice that one can see through more than a single window to a far wall, yet both windows still show their reflectivity. From a game-playing point of view, it's also interesting that the game properly models the presence of the multiple windows: fire a single bullet through the windows at a far wall - you will see a hole in each window and a bullet mark on the far wall, all correctly lined up.
There are two kinds of environment mapping:
The example image shown at the top of this page uses the second technique: it shows a spiral-shaped object reflecting a photograph of a restaurant scene. Click on the image to download a much larger version. Below is a final, much clearer example: four different views of the SGI O2 computer chassis, reflecting a restaurant/bar scene.