In regard to the vertical slice. Do studios work on/produce it to pitch a game or is it used as a milestone to reassure the money people that the game is progressing? (or both)?

Both. The vertical slice is a big milestone in a game's development because it shows the entire game coming together in a cohesive play experience. It typically signals the end of preproduction and the transition to production - we're no longer going to spend time coming up with any more major new ideas for game systems because we're committing to what we have and building those systems out. The vertical slice (sometimes also called First Playable) is our milestone to showcase all of our work so far.

Because it's a showcase, the vertical slice is an excellent demo to pitch to executives and publishers. Since it shows all of the major systems in the game working together, it naturally answers most questions about how the game will play. The executives/publishers can get a strong idea of what the finished game will be like, which gives them sufficient context to decide whether to fund the rest of the game's development (from production to ship and possibly beyond). This also gives them a good idea of how much longer the game will take to build, how the game will fit in with the rest of the publisher's release schedule, and how it will sell.

Similarly, the vertical slice also serves as a proof-of-concept for an internal project and used to get the green light for continued development. Most publishers won't fully fund projects from inception to completion unless they are well-established franchises (e.g. Call of Duty, Pokemon, Madden, etc.). What's more likely to happen is that they fund initial prototypes for several new game ideas, then approve the more promising ones and cull the rest. Internal projects go through these "green light" meetings where the executives assess development progress and determine whether development will continue. The vertical slice is an important green light showcase for exactly that reason - entering production requires a significant increase in workforce to build the rest of the game out, so the vertical slice is a big financial commitment.

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