I'v always wondered this. In a game like GTA where there are 10s of thousands of objects, how does the game know as soon as you're on a health pack?
There can't possibly be an event listener for each object? Iterating isn't good either? I'm just wondering how it's actually done.
There's no one answer to this but large worlds are often space-partitioned by using something along the lines of a quadtree or kd-tree which brings search times for finding nearest neighbors below linear time (fractional power, or at worst O( N^(2/3) ) for a 3D game). These methods are often referred to as BSP for binary space partitioning.
With regards to collision detection, each object also generally has a bounding volume mesh (set of polygons forming a convex hull) associated with it. These highly simplified meshes (sometimes just a cube) aren't drawn but are used in the detection of collisions. The most rudimentary method is to create a plane that is perpendicular to the line connecting the midpoints of each object with the plane intersecting the line at the line's midpoint. If an object's bounding volume has points on both sides of this plane, it is a collision (you only need to test one of the two bounding volumes against the plane). Another method is the enhanced GJK distance algorithm. If you want a tutorial to dive through, check out NeHe Productions' OpenGL lesson #30.
Incidently, bounding volumes can also be used for other optimizations such as what are called occlusion queries. This is a process of determining which objects are behind other objects (occluders) and therefore do not need to be processed / rendered. Bounding volumes can also be used for frustum culling which is the process of determining which objects are outside of the perspective viewing volume (too near, too far, or beyond your field-of-view angle) and therefore do not need to be rendered.
As Kylotan noted, using a bounding volume can generate false positives when detecting occlusion and simply does not work at all for some types of objects such as toroids (e.g. looking through the hole in a donut). Having objects like these occlude correctly is a whole other thread on portal-culling.