Lua is a big glue language in the game industry these days.

And not just slow-paced games either; the Lua Foundation gets a credit in some of the recent Street Fighter games.

Can you explain a little bit more how Lua fits game development? (I have never worked in a game-dev-shop before)

We mostly used Lua as a scene/level description language and for stuff like UI as you can tweak the code and see the updates live without having to rebuild anything. Plus it's really easy to implement the Lua - C++ interface and Lua is generally a nice, easy language to write in.

You embed the scripting language VM in to the game application and expose some API to it - which is then used to build the game content - things that require customization but aren't performance critical or technical, like triggers/events, ie. what happens when character X enters area Y, when user presses X, where it would be ridiculous to recompile the code just to modify it and you want non programmers to be able to do the customization in a "safe" language - sort of like javascript/DOM allows designers to do some programming while the grunt work and low level details/performance critical parts to the C++/native implementation.

I've also never been paid to make games, so hopefully someone who has can come along and correct me. I've found that Lua is a great fit because the cost of calling from native code to Lua and from Lua to native code is almost zero, because even running big routines of pure Lua is reasonably feasible, and because it's much more expressive than C++.