From wikipedia:
A game is an activity, generally recreational in nature, involving one or more players. Most commonly, the word refers to board, card and video games as well as sports. A game generally consists of a goal that the players try to reach and a set of rules that determines what the players can or cannot do. Games are played primarily for entertainment or enjoyment, but may also serve as exercise or perform an educational, simulational or psychological role. Group leaders can use games for creating or altering an individual's ego-boundary or a group's interpersonal boundaries. Games can also be used to alter an individual's or a group's mood. Since games can generate a higher and less cognitive arousal level, they are useful after a large meal or a long and tedious task, but are not good for pre-sleep needs.
Although games have been played since prehistoric times, much of our understanding about them remains speculative.
A simulation is an attempt to model a real-life situation on a computer so that it can be studied to see how the system works. By changing variables, predictions may be made about the behaviour of the system.
Simulation is used in many contexts, including the modeling of natural systems or human systems in order to gain insight into their functioning. Other contexts include simulation of technology for performance optimization, safety engineering, testing, training and education. Simulation can be used to show the eventual real effects of alternative conditions and courses of action.
Key issues in simulation include acquisition of valid source information about the referent, selection of key characteristics and behaviours, the use of simplifying approximations and assumptions within the simulation, and fidelity and validity of the simulation outcomes.