Reports Wired Magazine:
While other companies often start by creating massive design documents that detail minute aspects of a videogame’s characters and levels, Nintendo produces rapid prototypes. The company creates, tweaks and refines a gameplay mechanic until it is fun and appealing, often spending many months in these very early phases.
“We prototype intensely in the beginning, until we find that core mechanic that really seals the deal,” says Tanabe, a producer at Nintendo’s home office in Kyoto, Japan. Even after that, Nintendo will change and refine games very late in the production process.
Although I’ve developed software from both a waterfall and agile standpoint, both have their pros and cons. But my gut tells me agile might be slightly better, especially as it pertains to games.

Can you explain the waterfall and agile terms?
Using agile does not imply that drastic changes to the scope of the project can be made, late in the game or otherwise – such as "upending the tea table", which is what this article is about.
Agile is just a project management methodology that increases visibility into tasks, status, and progress. If you use it, you still need to have a clear idea of where you're going.
It does, however, give you greater ability to re-prioritize tasks, whereas you can not so easily in waterfall… but the same tasks will get done either way. Just potentially in a different order and with greater visibility into progress.
Changing the scope is changing the scope… You can do that regardless of what methodology you're using.