Indeed. The word mob dates back to the birth of computer games, long before home PCs were common and before consoles hit the scene.
Its actually a contraction of 'mobile' In that it should only really be used for something that can move. MUDs are pretty much the source as far as this goes (and the first of what today's gamers might call 'true' games).
if I recall the code correctly, the Smaug codebase makes very little distinction between rooms, objects, and mobs. I think the term may have originated from that little fact, since a mobile is basically just a walking object.
As for what is a "true" game, I think the original would have been adventure, or whatever that old text adventure was that was written in the 70's. MUDs (and related genres) would make the first MMOs.
Roguelikes incidentally are another ancient genre. DF is by far and away the most complete i've ever seen though since it transcends into a sim too.
Depends on how you want to define complete. Dungeon Crawl Stone Soup is a rather good Roguelike, and I believe ADOM and ToME are quite expansive on all fronts.
[quoteOn the OP: They wont get a happy slaughter thought since they were not involved. They may get some emotional hardening from witnessing death, i've never seen that confirmed or refuted. They certainly wont get a 'witnessed death' unhappy thought as that seems to be reserved for members of your own civ.
[/quote]
I didn't expect them to really get a happy thought from it, but the mental image of dwarves drinking dwarven wine and chatting while goblins are tossed 16 levels to their death is just amusing.
As it so happens, a seige has landed me 5 captured trolls to testing purposes. This should be entertaining.