With regards to effects on digital sounds/music, it would be all software based and programmed into the game. No outside processing required. Unreal used to do this quite well. There used to be EAX for hardware accelerated sound effects specifically for this, but it's been abolished it seems. But with the capability of today's computer resources with gigabytes of memory and terabytes of storage space, I don't see why these things can't just be programmed into the backend of the game itself without requiring hardware acceleration. I don't see a reason why a game couldn't have the same effect capabilities like reverb, delay, eq, modulation, etc that are present in modern DAWs programmed right into a game's engine. Not the exact same plugins, obviously, but I don't see why something similar isn't possible. I mean, it already works in a DAW just fine.
I believe some games still use reverb, but not much else. Real-time EQ effects, even if they were a selection of presets within the backend, would do wonders for game atmosphere. They already kind of do this with games that support surround sound emulation. They just need to put more effort into it. Everything is bounced down to a sample now and I just think things can be more dynamic.
Anyway, I've ranted off-topic long enough lol. Just some personal dreams. Moving on.