When Batman: Arkham Asylum was announced, a lot of video game fans were skeptical because most of the other Batman games have turned out to be very disappointing. There was nothing that fans wanted more than an excellent Batman game (who wouldn't want to be the Dark Knight?!), but they weren't getting their hopes up anymore. Then several announcements came out about Arkham Asylum, including that the voice actors from Batman: The Animated Series would return. Then, a few screenshots were released that rustled up some genuine excitement from the gamers. It looked pretty solid, and everyone knew that Kevin Conroy and Mark Hamill were the quintessential Batman and Joker voices. Slowly, fans started to think "what if Arkham Asylum is actually good?" and the released videos of the storyline and action were all very positively received. Done correctly, this game could change everything, it could set the bar for comic book games from here on out.
Honestly, that is exactly what Batman: Arkham Asylum does. They have managed to beautifully tie in real Batman lore and story with engaging combat, puzzling side quests, and challenging gameplay. The story finds Batman bringing the Joker home to Arkham Asylum, but he's a little concerned since it was far too easy to capture the clown. It becomes clear this was all a trap when Joker springs to action, and the entire island is shut down. The prisoners are set loose on the guards, and only the Dark Knight can save them now. The design of Arkham itself is very true to the comics and visually stunning in a dark, gritty sort of way. The only character revamp that didn't quite work was Harley Quinn's turn to skankville; her original costume was so perfect for her character, and the new one seeks to show skin more than personality.
Yes, Harley is one of the main villains in the game, and you can also hope to see Killer Croc, Bane, Scarecrow, Poison Ivy, and a scattering of other big name baddies from Batman's world. The Riddler does not make a direct appearance, but he's part of the major side quest. You can collect items about each villain as you wander through the broken down Arkham Asylum buildings, including character evaluations and excellent audio recordings of their therapy sessions at Arkham; Poison Ivy's is particularly amusing.