To summarize for people who don't want to click in, different gamers are willing to pay different amounts for the same game. If you keep the price high then you earn a lot per customer but on a small customer base. Set the price low and you earn a little per customer but on more customers.

Price discrimination is basically finding ways to charge each customer the most they'll pay - that way you earn a lot for the customers willing to pay the inflated amount while not losing the customers looking to save money.

There are a variety of ways businesses do this - sales are one way. Grocery stores often use coupons, as higher income consumers often won't bother to deal with clipping coupons. Sometimes the exact same manufacturer will make both a brand name product and then the generic brand with a small tweak. For business to business sales, some companies do pricing per customer based literally on the most they'll pay.