Modding the textures to make the enemy say bright pink in games like MW2 is cheating, and goes down the same path as aimbots. But making your own textures as a creative input can help a game. For example Command and Conquer Generals, there are many mods of this game with address balance issues, introduce more 'generals' and create more broader fractions.
Another example would be where the textures from older games are taken and re-rendered at a higher resolution.