My favorite video game music would probably have to be that found in Banjo-Kazooie. Not only did the music sound good, but the way it was incorporated into the game is ground breaking. In video games, the music you hear often depends on where you're at. Simple enough, but Banjo-Kazooie took it a step further.
In Banjo-Kazooie, the music wouldn't just reflect the world you're in, but where you are at within that world. In Spiral Mountain, you would hear a banjo playing an upbeat tune. When you began swimming underwater, you would hear the same music, but played with a xylophone instead.
In Banjo-Kazooie, you had to collect puzzle pieces. You would use these puzzle pieces to complete unfinished portraits within the over world, also known as the Witch's Lair, so you could open up new levels. As you approach these portraits, you hear the same music, just played in a different way.
Here's the music you hear in the Witch's Lair.
As you approached the portrait of Treasure Trove Cove, the music would smoothly transition to this..
Bubble Gloop Swamp's portrait?
That's not to mention how well the sound track is by itself, without the transitions and multiple variations. Each world would have it's own sound track, all of which would also change depending on where you were within those worlds (such as if you were under water).