Distributing the TTF is usually significantly more expensive (money wise) than other licensing schemes, so the games that do that are pretty rare. See also this threadthis thread. You don't want to make a Unicode font yourself.
Most implementations I've seen follow something like what you suggested in your second bullet point. A lot of modern AAA games, though, are starting to use Flash to render all their UI elements and I'm not entirely sure how that handles its fonts.
