Decently, but the graphics cards in Apple computers are never high end, and the card in that iMac in particular is not too hot. You will be bottlenecked on anything 1-2 years down the road being able to play new graphically intensive games on low-medium at best, if at all. For the same price, you can build a computer many times more capable/powerful (GTX 570, i5 2500k, 8GB RAM, SSD, etc.)
The VRAM on that card is really kind of the killer when many mid-high end cards have at least 1GB now. So you might be able to meet the minimum requirements and run stuff, it just won't be super pretty. (I know speaking as someone with a 2009 MBP with 256 MB of VRAM.)
Though if it's of any help, I can still run Mass Effect 2 on this laptop, just not super smoothly.