For years, developing Web-based casual games was little more than a hobby, a means of creative expression for game enthusiasts. Then advertising revenue started to reshape the casual gaming landscape–now, multimillion-dollar deals, flourishing start-ups like Mochi Media and Kongregate, and the attention of media giants Google (GOOG), Yahoo (YHOO) and Microsoft (MSFT) are the name of the game. Sustaining the stream of quality games to play is now a business venture in itself, and with ad revenue streams at their disposal, developers stand to make a real profit off of their work. But just how much money can these new revenue streams bring to casual game developers’ pockets?

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With so much venture funding going into Web-based, ad-driven casual games (both the companies that create them and those that monetize them), you’d think the gaming industry as a whole was moving in that direction. I certainly did, at least until today. But Yahoo Games just told me that starting this week, they’re going to host free, downloadable casual games embedded with video ads. (Think games that play more like TV shows, with commercials between breaks.) Fifty of them are available now; by end of the year, according to division head Kyle Laughlin, they plan to have 400 of these ad-wrapped games online.

This is no small play, and has the potential to reshape the game industry.

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