As long as there have been games, there have been cheaters, and video games, particularly online games, are certainly no exception to this rule. While cheat codes are commonly used in single-player games to overcome difficult stages of the game, or just to spice it up a little, it's an entirely different matter when you're competing online. Multiplayer games are usually intended to be contests of skill and strategy, and most players simply won't settle for anything less.
Online games have been a cheaters paradise in some ways because you can remain relatively anonymous, the technology is difficult to secure, and hacks tend to spread quickly over the Net. The motivation for cheating can range from wanting to earn the awe of your friends, to wanting to ruin the game for other players, to wanting to have a heap of game currency to sell on eBay. It appears that there will always be someone that refuses to play by the rules.
A Sordid History
Aside from the removal of cheat codes from multiplayer versions, early online games were rarely designed to prevent cheating. After all, playing an FPS with other people over the Internet was a borderline miracle only a decade ago, nevermind ensuring that no one was tinkering with the software. It wasn't long, however, before the availability of hacks started to have a very negative impact on gameplay. If you were a Team Fortress player in the mid 90s, you probably remember a time when there seemed to be more cheaters than not in the game, and using a small arsenal of hacks was considered necessary simply to "even the odds."
When multiplayer games become overrun with cheaters, honest people will either stop playing or they will restrict their play to password protected games between friends they trust. In fact, several online games have, at one time another, seen a huge exodus of players due to cheating. Age of Empires comes to mind, and America's Army had become almost unplayable prior to the introduction of Punkbuster. Multiplayer Web games and poker rooms are also frequently targeted by cheaters, particularly when there is money at stake.
The gaming community has always been on the forefront of efforts to keep the contest fair. Server admins have long been circulating lists of known cheaters and implementing ways to check client game files for alterations. People started looking for more comprehensive ways to combat the problem, and finally solutions such as Even Balance's Punkbuster software emerged. Punkbuster is now used by over a dozen retail titles, making it the most common anti-cheat software used in online action games.
Subscription games like Ultima Online and EverQuest have even more at risk because a loss of players is directly linked to a loss of income. They've had to make catching cheaters a priority right from the start, but they also have the advantage of controlling the servers the game is played on. When a problem is discovered, it's relatively easy to make changes and/or ban the culprits. Today's MMORPGs operate under the watchful eye of large contingents of game masters, and it's still impossible to ensure that there are no shenanigans going on. The most one can hope for is that the shenanigams will be discovered and correctly quickly.
How Cheaters Cheat
Unfortunately, there are a tremendous variety of ways to cheat in most online games. One common form of cheating is to collude with other players or members of the opposite team. It's not difficult to use communications outside of the game, such as an instant messenger or telephone, to gain an advantage over other players. The effectiveness of this varies from one game to another, but there is really no way to stop it at this point in time.