System for interactive dialogue

[dafrick]

Many games have a way to talk to NPCs (non player characters) to deliver the story, integrate Quests and Hints more seamlessly into the gaming experience and do many more things.

Your task would be to develop a simple system to talk to an NPC via a scripted dialogue, that can, depending on what you say also have side effects on the game.

Look at other games and see how this is done, think about what you like and dislike about the different dialogue systems and implement a system that you think offers the most to the player.