It varies, but there is a constant in that most dev houses will have some inhouse audio designers because of the major task that is integration.
Integration is quite a skill in itself, i’ve played many a game with great sounds, good music and decent dialogue but how it was implemented and mixed left a lot to be desired! Alot could possibly be down to technology-decent tools for audio integration are thin on the ground, and while its slowly changing, programmers are invariably found somewhere in the audio integration pipeline!! uh-oh!!
Creation of game audio does have its own set of ‘rules’ compared to post-prod. Game audio, in terms of fidelity, is pretty high in these days of next-gen – 48KHz, 16bit for the 360 for example, so its all neumanns, nice preamps and clean signals, but knowing how the audio will be implemented will drive how its recorded and edited. Foley recording for games is a tad different from PP stuff for example, and animations can be very specific because your dealing with looping, and triggering from key frames and multiple files triggered from 3D points from scripts etc etc.
Devs do tend to use a lot of outsourcing, especially music and dialogue and more and more sound design, simply because there are more PP houses who know and understand the specifics of creating sound for games, with inhouse audio designers, like me, creating audio and becoming an aggregator and integrator of outsourced audio.
jeese my eyes are all blurry so i’ll yield.