Many games these days have to strike a delicate balance between being challenging and engaging enough for experienced players, while also being approachable enough for new fans. Skyrim is a great example of this.
While it retains a lot of the mythology and design from earlier games in the series, the experience and leveling system was completely revamped so new players could join in the fun without having to worry about building their character the wrong way, which was what turned me off from playing much of Oblivion.
Similarly, while Driver: San Francisco was using the established brand name and characters to sell it, I was still able to jump in with no problem. On the other hand, some companiess know that they have a niche market, so they focus entirely on pleasing those loyal fans, which is why I remain excited for Devil Survivor 2 despite knowing very little about the game.
However, a thought occured to me while playing through Sonic Generations. His previous games (Unleashed and Colors) did what I described in the first paragraph - trying to please both longtime fans and newcomers.
However, Generations strikes me as an unusual game because it relies almost entirely on catering to nostalgia. I can't imagine that a child playing the revamped Chemical Plant Zone would get the same amount of enjoyment out of it that I would, having played Sonic 2 so many years ago.
Would a new player understand why a truck is chasing Sonic in City Escape from Sonic Adventure 2? Even more bizarre is the inclusion of Crisis City from the abysmal 2006 Sonic the Hedgehog. Out of context, the level is fine, but the people who played that game might actually feel a bit resentful of its inclusion.
The game presents itself as a museum of sorts of Sonic's greatest moments, but it relies so much on nostalgia that I think it only alienates people who haven't followed Sonic's career. I hate to say it, but a few more cutscenes would have helped things out a bit. Early on the game does a good job of it, as Tails doesn't recognize Green Hill Zone since his first appearance was Sonic 2.
A line of dialogue about the purple water making him feel nervous wouldn't make much of an effect on casual players, but longtime fans will remember how Tails' AI caused him to drown repeatedly in that level.
After these first two levels, levels start to feel more disjointed. The levels might feel nostalgic for me, but I would have loved for Knuckles to reminise about how Robotnik tricked him on Angel Island. The fight against Perfect Chaos (the final boss of Sonic Adventure) might seem like just a random water monster to a new player. I felt that feeling myself when I fought a late game boss against what I assume was an enemy from Sonic Unleashed. The lack of context kills the moment.
And yet, there are are so many little touches in the levels that make it feel like the developers really went out of their way to please the longtime fans. A section from the Sonic Heroes level is ripped right out of Hydrocity from Sonic 3, despite Sky Sanctuary already covering that game.
In the revamped City Escape, "Missing" posters are hung on buildings with characters like Mighty the Armadillo and Nack the Weasel, characters that haven't shown their faces in 15 years.
Things like this tell fans that Sonic Team hasn't forgotten these characters (personally, I would love Nack to be an antagonist in a future game). The infamous "drowning" music returns, and will also strike fear into the heart of those who played it as a kid. The only thing they missed was the dreaded barrel from Sonic 3, which would make for a terrifying final boss.
I don't think there's anything inherently wrong with using nostalgia to sell a game. It might only be going for a niche audience, but there are also niche audiences for fighting games, or challenging titles like Dark Souls, and those games sell just fine.
Developers who use such a strategy may need to be careful for how long they do it, though. Mega Man 9 was a phenomenal success because of how well it imitated the classic games, but Mega Man 10 had nowhere near the same respect. Super Smash Bros. Brawl is a game crammed with fanservice, but I don't see myself getting too excited for the next one unless big changes are made to distinguish it from the previous games in the series.
3D Dot Game Heroes may have been a great homage to classic Zelda games, but the problem is that it doesn't have much of an identity of its own to hold the experience up. The only reason Goldeneye was even made was to capitalize on how popular the game was back on the N64, as outdated as it was.
A better way to use nostalgia is merely for an easy way to approach a game. Mario titles always sell well because they both provoke nostalgia, while also remain friendly to newcomers. Same with Donkey Kong Country Returns and the two Wii Kirby games.
On the flip side, Super Meat Boy is an extremely difficult platformer that brings back memories of difficult games from the past, completely with cutscenes mimicking classic games. Yet SMB stands up on its own as an excellent game because it takes effort to prove its own identity. Rayman Origins may have been "going back to the series' roots", but I cared about none of that as I traversed the excellent levels and took in the great music.
Ultimately, there is such a thing as relying on nostalgia too much, which Sonic Generations does. The game is fine for the most part, but the nostalgia seems to be a replacement for context, rather than working together. It seemed to have gone for the levels most people have played, not the ones that would have provided the most balance and variety.
Particularly strange was Seaside Hill, the first level of Sonic Heroes. The game had an average reception, so it is likely that many people would have played the first few levels and quit, so it makes sense for this level to be chosen. However, fans seem to agree that the Egg Fleet (a level where you travel from airship to airship causing destruction) would have been a better fit, seeing as how it takes place in the later half. Context is key.