Gothic is an RPG/adventure game played from a third-person 3D perspective. You play as a convict who is literally thrown into a magically-sealed outdoor penal colony. The colony spreads out over a large stretch of countryside filled with the usual RPG elements: hostile creatures, NPCs, caves, and settlements. Despite the fantasy setting, the game's tone is realistic. In the beginning, almost anything can kill you in one or two hits. Armor is hard to come by, and you can't wander the countryside until you get some training and equipment. Eventually you have to join one of three factions, and not surprisingly, doing so entails talking to several NPCs and going on quests for them. Overall, Gothic plays like a cross between Morrowind and Fallout; the gameplay is akin to the former, and the adventure elements are akin to the latter.
I recommend the game, but be aware that it will require patience. As everyone rightly points out, the interface is unnecessarily awkward. For example, inventory management is strictly a keyboard-only affair--you can't point-and-click on what you want. Moreover, performing an action, such as picking up an object, involves two keys, not one. Finally, the combat system is unwieldy, although it gets better when your combat skills improve.
Nonetheless, once you get past these problems, the game itself borders on greatness. For one thing, the story is quite excellent. Each of the three factions has a different approach to living in the colony, and you will quickly become involved in the politics of each faction. All of the dialogue has been recorded, including that of the player, and NPCs go about their business in accordance with a day-and-night cycle. Indeed, the NPCs "live" more realistic lives than the NPCs in Oblivion, who often stand around and stare at you creepily. In a nutshell, Gothic's gameworld never feels artificial or empty.