GTA, specifically, doesn't use all the landmarks they find - they instead use rough facsimiles that give the same impression. It's really rather brilliant - a different design, but somehow it's familiar if you've been there or seen that.
Ultimately, for video games, they are still designed by hand, because of the "if it's not there, it doesn't exist" problem and for a host of other reasons. Unfortunately, for space reasons, most of it is non-interactive in a meaningful way.
There's some interesting work being done by ESRI that could hopefully lead to virtual city designs that are almost fully interactive. Imagine GTA where every building could be entered and every object could be interacted with because they are generated on the fly.
Sort of a realistic Minecraft. Very sort of, but still.