I've been wondering this also. I'm new to Android, but I don't get why when I download something whether a game or not the app wants me to agree to permissions that make it seem like it's touching and taking over every setting in the phone. I've hesitated on a bunch of apps I wanted to check b/c they all had ridiculous permissions and agreements if I wanted to install. Actually that goes for pretty much any app I've downloaded. I'm used to Apple's and Cydia etc stuff where you just install and that's it... why do games and other apps need contact info, or gps/modifying settings etc that have nothing to do with any of that stuff???
The apps in Apple's Appstore would have similar permissions but you don't see it. These apps are approved by Apple, so you just hope that they have passed the screening process. With Android, Google doesn't really screen the apps that go on the market. Google expects YOU as the user to screen the apps yourself. They made the apps more transparent by showing you what permissions they want and why.
I would recommend you read this Beginner's Guide to Android:
http://androidforums.com/android-ap...ps-avoid-viruses-guide-those-new-android.html
For me, games should have only these permissions as I understand what they are for
-Internet (ads, Faint server)
-GPS (targeted ads...yuck but it's used for free ads based games...so something you gotta 'live' with if you want to use the free aps. I don't want to see this permission with a paid app though)
-Phone calls: read phone state and identity (to see the state of the phone. I have issues with this permission as there are TWO kinds built into one. Apps reading phone state is fine but I don't want it to read phone identity (phone number, IMEI and such)
-Storage:
modify/delete USB storage contents modify/delete SD card contents (move to SD option)
Any more than this and I start to question the app.
Surf1, if you have any other questions about permission, I would suggest you post in the thread I linked

The OP is a great at answering questions.