I believe that people will keep pirating games and movies. So, we should not stop it. Instead, game companies should make stuff no one can pirate. Physical objects. I'm talking about merchandise, game cases signed by the developers, game competitions (with entrance fees) etc. You see all that crap you can buy that has Hannah Montana's face on it? Well, she has the right idea. People will steal her music, but they can't steal a lamp with her face on it. At the very least, they should sell shirts with thier VG characters. I'm telling you, if they made a shirt based on Cave Story, Half Life, Duke Nukem, Hitman, or another one of my favourite series, I'd buy it. The only reason my entire wardrobe isn't VG related is because I can't find enough clothes that are.
Another option is to release every game for free download, but with ads. We get every tv show basically for free, but we have to contend with ads. So, if every game supported itself with ads, every game would be free. Furthermore, companies would only get paid for games that sell more, so we would see a general drop in poorly made games. EA did this awhile back, with Farcry, PoP, and two other games. They rereleased them for free, but with ads.