Short answers, pulled from the story.
A cutscene is a non-interactive sequence in a video game that interrupts the gameplay. These scenes are used to show conversations between characters, set mood, reward the player, introduce new gameplay elements, and foreshadow future events. They appear as live-action footage, pre-rendered CGI animation, real-time in-engine sequences, or interactive scenes using quick time events.
The earliest cutscene-like sequence appeared in The Sumerian Game (1966), a mainframe game by Mabel Addis that displayed a synchronized slideshow before play began. Taito's Space Invaders Part II (1979) introduced in-game scenes between levels, and Shigeru Miyamoto's Donkey Kong (1981) was the first to use cutscenes to advance a complete narrative.
Data East's Bega's Battle (1983), a laserdisc arcade game, introduced animated full-motion video cutscenes with voice acting. The scenes developed a narrative across the game's shooting stages and established what became the standard approach to video game storytelling.
Cutscenes appear as live-action footage, fully pre-rendered CGI or cel animation, real-time in-engine sequences (also known as Machinima), mixed-media combinations of those techniques, and interactive scenes using quick time events. Wing Commander IV used Hollywood actors including Mark Hamill and Malcolm McDowell, while games like Super Mario Odyssey use real-time rendering that carries the player's chosen outfit into scenes.
Directors Steven Spielberg and Guillermo del Toro described cutscenes as intrusive, and Danny Bilson called cinematics the last resort of game storytelling, arguing that players do not want to watch a film. Raph Koster noted that while cutscenes offer the largest possibility for emotional engagement in a game, they can also be removed with no effect on actual gameplay.
Quick time events are interactive cutscenes in which button prompts appear on screen and require the player to respond correctly to continue. The mechanic originated in laserdisc arcade games including Dragon's Lair, Road Blaster, and Space Ace.