I use games regularly in my classes; at least every second class has some kind of game or contest.
I use them mainly for motivation. Students need to feel that they will do something interesting in the classroom. They study at school all day and come to English class just to do more academic study? I don't think so!
They are also useful for the teacher to evaluate the students. How well have they learned the vocabulary or structures? Can they use it appropriately in the conversations?
There are also students that have different learning styles. I, for example, am a hands-on kind of guy, very kinetic; I learn through doing.
So, games can provide an alternative learning experience for those students who are more visual, interpersonal or kinetic.
Look up 'multiple intelligences' and 'Howard Gardner'