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Radiant storytelling appears to be a feature that Bethesda used in the making of Skyrim that acts as a narrator for the Dragonborn in the world. It records their actions and changes things in the world according to what one has done - for example, if the player decides to murder someone, their family will find out, as well as the community. It also adjusts game difficulty depending on player's skills and changes different things in quests such as different reactions or outcomes depending on how one plays, like deciding not to enchant armor supposed to as a favor for someone out of the Dragonborn's own money; he would then pay them back. If the player decides to sell the armor instead, Radiant Story would adjust the quest to his preference.
The townspeople loitering aimlessly in town squares won't be found anymore. Each citizen performs tasks that make sense in their environment. To impart the towns and cities with a greater sense of life, Bethesda has populated them with mills, farms, and mines that give the NPCs believable tasks to occupy their day. The improved Radiant AI technology is also more aware of how a citizen should react to one's actions. As character performs tasks for them or terrorize them by ransacking their home, the NPCs develop feelings about him. If the Dragonborn is good friends with a particular NPC and barge into his house during the middle of the night, he may offer him lodging rather than demand to leave the premises. If the weapon is swung near an NPC, items are knocked off their dinner table, or an attempt to steal something of value is discovered, they'll react with an appropriate level of hostility given their prior relationship the offender. Another good example of this is that if the player clears the Kolskeggr mine, near Markarth as a miscellaneous quest accepted from Pavo Attius - and return to him, an Orc by the name of Gat gro-Shargakh will make a comment saying that he has informed all Orc stongholds in Skyrim of the good deed and consequently, they will not be hostile towards the player.
Many quests are still completely governed by Bethesda, but the Radiant Story system helps randomize and relate the side quests to players to make the experience as dynamic and reactive as possible. Rather than inundate with a string of unrelated and mundane tasks, it tailors missions based on who the character is, where they are at, what they've done in the past, and what the're currently doing. Radiant Story is also smart enough to know which caves and dungeons the Dragonborn has already visited and thus conditionalize where, for instance, a kidnapped person is being held to direct the player towards a specific place they haven't been to before, populated with a specific level enemies. Skyrim also tracks the player character's friendships and grudges to generate missions. For example, doing a small favor for a farmer may eventually lead to a larger quest. Some NPCs will even agree to accompany Dragonborn to help him out in specific situations. This proves very useful when fighting enemies.