this page could possibly serve as an interesting, though rather rudimentary read on the topic at hand.
now, in the aforementioned
Fable series, you could seduce, pick up and even marry characters of the same sex.
in
Ultima VII you could have some same-sex fun in the whorehouse at the Buccaneer's Den. choosing a same-sex host did raise a few eyebrows from the NPCs involved, but there were no questions asked and no overarching consequences. (aside from the unicorn refusing to talk to you afterwards, but that had to do with losing your char's virginity) oh, and the male host was a pickpocket, so you'd pay more than you bargained for even if you were playing a female character.
there are other games with a homosexual theme, but my pick for the absolute pinnacle of 'gayness' in mass-market games would be
Dragon Age. it's apparent from the very beginning. if you choose a human noble as your character, there's an episode in the intro where you can choose to score a guy or a chick. it becomes even more apparent with the game's progression, as there are certain members of your party that can be made into your bedmates (and more than that), regardless of their sex. you can even have a threesome.

that's in part what makes a good RPG, the ability to
have a threesome shape every aspect of your character as you see fit, in the context of a game. including sexuality, which is a powerful driving force behind us humans.
now if you WERE looking for something more explicit, while there are very few games made by us westerners that revolve around this particular theme (and what little there is is utter shit), our Japanese brothers actually have entire game studios devoted solely to making gay games. there are many titles available, ranging from gentle, romantic teenage love stories to pure pornographic material, and everything in-between. it seems that they often fall under the 'visual novel' genre, but there are exceptions. the 'yaoi' theme seems to be the most prevalent in these games, but there are also quite a few 'bara' games for guys without the pedo streak. my favourite so far would be
Ride on Shooting Star, a strange cross-genre game by Underground Campaign. still waiting for a translation of this one into English, as I've enjoyed it a lot, but hit the language barrier and was unable to continue after a certain point. be aware that this is a very explicit game, with lots of butch guys having raw, sweaty sex with each other.
as for why so few mainstream games embrace the topic of homosexuality, well, I believe that this matter is at least two-fold. first, stuff that pertains to sex life is best fitted in sex games. second, mainstream games are generally created and marketed towards a wide demographics. taking into account that homosexual audience is but a fraction of potential customers, there's little incentive for game-makers to gear their product towards this particular demographics. in this regard, Lionhead and Bioware did a wise thing with their choose-your-own-sexual-preference-or-any-mix-thereof, potentially widening their player base, but without alienating their primary customers. the gay stuff is not readily apparent, neither in
Fable, nor in
Dragon Age. you have to actively pursue this type of action, and a typical heterosexual person simply won't choose the relevant options, effectively rendering the issue non-existent for most players, while still remaining viable and valuable for the interested parties.