In a new Gamasutra feature,
neuroscientist Erin Robinson looks at a collection of studies looking
at gaming's effect on the brain, including many showing potentially
beneficial health effects from gaming.

For instance, one study looked at using virtual reality games to limit
the pain felt during difficult dressing changes in child burn victims.
By interrupting and distracting thoughts of pain, the VR game led
children to report reduced pain perception compared to those on
painkillers, with fewer side effects as well.

Another study from two years ago looked at using the Wii to aid stroke
victims in their physical therapy, finding that a group of 16 patients
showed improvement in movement and coordination after just two weeks
with the system. What's more, the entire group reported that playing the
system was comparable or better than conventional physical therapy.

Video game can also be useful for limiting the symptoms of
schizophrenia. One study showed eight weeks of game play decreased the
incidence of schizophrenic symptoms like delusions and hallucinations,
when compared to a group that simply watched TV and movies. The effect
worked across all types of games, and may have to do with the medium's
activation of the brain's frontal cortex.

Even those without active physical or mental problems might find
benefits from gaming, with studies showing that those who play action
games are better at processing complex visual information, and others
showing seniors can improve thier cognitive function with logic and
puzzle games.

The complete feature
looks into other studies that involve the intersection between
neuroscience and gaming, including the potential use of drugs to treat StarCraft addiction, the effect of virtual avatars on our self image, and a look at how the brain reacts to Super Monkey Ball.

For the pain distracting thing...i can vouch that myself since it did have that effect on me