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The star of the latest Elder Scrolls role-playing game is its world.

Skyrim, the northernmost province of Tamriel, a continent that fans of the Bethesda Softworks series have been exploring piecemeal in games dating back 17 years, is a hauntingly beautiful and extremely harsh land filled with towering mountains, raging rapids and dangerous wildlife. Blue skies and bright sunlight can give way to pounding rain and blinding snowstorms in minutes. Calm nights on the tundra are lit by mesmerizing starscapes, an enormous moon and the dancing lights of aurora borealis.

The challenge is to explore this immense world, to understand it, and, in a way, to conquer it. The first time I made my way to the top of Skyrim's tallest peak, fighting off ravenous mountain wolves and nearly losing my way in a blizzard, I felt like I'd just climbed Mount Everest.

It's about discovery, as much as anything. The cumulative effect of gradually finding hundreds of hidden points of interest – an ancient altar in a secluded grove, a cave behind a waterfall, a shack buried in snow – scattered around Skyrim's gargantuan map is just about as satisfying as anything I've experienced in the world of games this year. The need to learn what's just beyond the next ridge or on the other side of a glacier is what has driven me on several nights to play until passing out from exhaustion, controller still in hand.

From the outset players are free to run off and begin exploring every nook and cranny of Skyrim, finding and completing quests as they run across them. This uncompromising sense of freedom is the great promise of open-world games, and with only a couple of exceptions – Rockstar's Red Dead Redemption comes to mind – none deliver on that oath in a manner as fulfilling as Skyrim.

Of course, the problem inherent in allowing players to complete missions in pretty much any order they like comes in ensuring that enemies remain suitably challenging throughout. Since Bethesda didn't want to make players afraid to explore, combat tends toward being a little too easy. Even when facing down the game's enormous and terrible dragons, I was rarely worried that my avatar was in any real danger.

However, the lesser degree of difficulty affords one the opportunity to do something not always possible in role-playing games: develop a wide range of skills in multiple disciplines. Whenever side quests began seeming too easy I'd switch to a new kind of magic or a different class of weapon with which I had little experience, which served the dual purpose of making skirmishes a little more challenging while allowing me to grow my character in gratifying new ways. Consequently, my avatar has become proficient in wielding one- and two-handed weapons, can use a variety of magical spells and is a crack shot with a bow.

What's more, managing the growth of these skills is a pleasure, thanks to a streamlined, intuitive and visually attractive menu system unlike that of any other RPG. For example, when you elect to enhance an avatar's abilities the camera sweeps up to a star-filled Nordic sky, where players move between constellations and select points of light that represent specific skills ( click here for a screenshot). It's a lovely graphical flourish that makes sense within the context of the game's mythology. Managing massive inventories, meanwhile, is made much more appealing thanks to three-dimensional object models that accompany each of the game's thousands of collectible items. Players can rotate and inspect these models, marvelling at their detail and occasionally discovering features and inscriptions embedded on their surfaces that may be vital to completing quests.

Speaking of quests, Skyrim is filled to bursting with them. An old man in a shack asking us to follow in the footsteps of the Northern people's proud hunters, an unhappy wife who want to punish her husband for being a drunk, a shopkeeper whose stock is being held up by a bureaucratic tariff officer – the type and scope of missions that players can undertake is nothing if not diverse.

And they're all framed around a sweeping central narrative that begins with a dragon attack that destroys a city. The game's primary plot concerns a rebellion against the province's governing forces that takes place under the twin external threats of foreign invasion and the terrifying return of dragons. Players step into this volatile situation as a rare breed of human known as "dragonborn," which means our avatars have the ability to slay dragons and steal their powerful, magical voices – an important strand of the story that develops in pleasing fashion as the tale progresses.

Bombarded with historical information in books, personal stories from hundreds of chatty non-player characters and persuasive arguments from key figures on both sides of the war, players are eventually forced to pick sides. It's not an easy choice. There's nothing so simplistic here as a morality meter by which we can judge the rightness or wrongness of our actions. Much like the real world, we have to make decisions based on what we know and what we believe. And sometimes we'll learn that we've chosen badly.

This theme – that problems tend not to be black and white but are instead frustratingly grey – runs throughout the game. In my first visit to Solitude, one of Skyrim's more prestigious cities, I stumbled upon an execution. Onlookers – including a young girl – were whispering about the sentenced man's innocence, and I was left with the choice of attempting to physically stop the beheading or allowing it to proceed. Going against instinct, I allowed the head to roll – not because I thought it was the right thing to do, but simply because I didn't have enough information about the situation and didn't want to make enemies of the town guard. Even if I managed to successfully overpower the soldiers overseeing the execution I figured I'd eventually be caught and thrown in jail, where I'd waste time and lose progress in various skills I was developing. I'm still not sure if my failure to intervene was out of a respect for the rule of law or an act of voyeuristic cowardice.

Situations of this sort are the essence of the game's flexible narrative, and, in the end, part of what makes the experience so compelling. However, while I savour any game that forces players to consider and later reflect on the meaning of their actions, this kind of dynamic, player-driven narrative has its weaknesses.

Since it's up to us to advance plot threads as we see fit, the pacing of certain stories will suffer as players choose to pursue other quests. A mission that seems urgent when first discovered can be forgotten for days or weeks of game time until the player comes back to it and realizes that the lives of many of Skyrim's citizens are effectively on pause between our interactions with them.

And, gifted as the game's writers and designers may be, they can't account for every decision a player makes. Players may occasionally encounter characters who "forget" to react with anger or praise depending on your in-game reputation, which, again, breaks the narrative spell.

As we said, these are problems common to the genre of open-world games, and most fans willingly overlook the few that arise. As for me, I just chalked up the continued goodwill of the old woman in whose health potion I pilfered (I accidentally pressed the wrong button, I swear) as a result of her failing eyesight and infirmity of mind.

And, in the grand scheme, such issues are relatively minor. With its unmatched free-to-roam world, brilliantly designed menus, gratifying combat and provocative narrative elements, The Elder Scrolls V: Skyrim is a monumental achievement in its genre and among the very best games of the year.

The Elder Scrolls V: Skyrim

Platforms: Xbox 360 (reviewed), PlayStation 3, Windows PC

Publisher: Bethesda Softworks

Developer: Bethesda Softworks

ESRB: Mature

Score: 9.5/10

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