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I have the 1st gen model and it's handled everything I've thrown at it quite well.
But in general Yes, it can play games just fine and at resonably enjoyable levels (in both detail and FPS). I have used it exclusively as my daily driver (replacing a 5950x/6900xt short term) for over two weeks and am just going back to the main PC. In that time I used it both docked and hand held to play Starfield, GTA Online, RDR2, Hotwheels Unleashed, Halo Infinite and MCC, Gunfire Reborn, and even MSFS2020 (this one has issues with crashing due to lack of RAM (works till total system use hits ~18-20gb then crashes (as the deck only has 16gb total).
Outside of MSFS being a dog (which is more the title than anything) the deck has done great.
Note on Smoothly: The deck runs Linux and is generally a very smooth system. Meaning frame times tend to be quite consistent. The OLED has a 90Hz screen, which allows for 2:1 and 3:1 Frame duuplication so 30FPS and 45FPS both feel great and keep the screen running at 90hz. Consequently, especially for single player titles, 30FPS might be a good place to play, might still feel perfectly smooth, and outside of the number on the counter will probably be fine.
If you are someone who always wants max FPS consider a laptop and not a mini-handheld. Part of the appeal to the Deck and others is that portability factor, and the biggest part of that factor is battery life.
There are many games that I have where the deck *can* to 60-90FPS but there is little if any real world benefit to me as the player, especially on the 7.4in screen, to have that high a frame rate. By capping to 45fps or 30fps I can lower the demand on the system, lower the power use, and extend by play time, sometimes by as much as double. Consequently, its pretty common to game at lower frame rates than on a desk top, if for nothing more than longer run times.
https://www.reddit.com/r/SteamDeck/comments/xgslv9/howto_installing_pacman_packages_in_userspace/
https://www.reddit.com/r/SteamDeck/comments/wbyilj/guide_installing_windows_gamesmodslauncher_on/
Playing portable modded Minecraft is quite a joy.
https://www.windowscentral.com/gaming/minecraft/how-to-play-minecraft-on-steam-deck
Yes you can get games running outside Steam from places like Epic, but its a problem in two ways:
1) For some games its just plain a hassle. Even if you can get it working its multiple minutes or maybe hours of setup. Compare this to what is typically an install and use experience from Steam. You pay for the game not being steam in your own time rather than upfront money. Or you can pay steam and save yourself the hassle. RDR2 is a perfect example. The "guide" to getting the epic store version running is lengthy and complicated. To surmise it, multiple replies to the guide simply stated in various ways it was just too much...
But assuming you can get the game working (which I totally have for many games, so its not like you cannot)...
2) Any non-steam game performs worse. Steam has cached data for the sahders and such. If you run non-steam games it works, but that data gets built on the fly and you get potential stutters (depending on title). But in nearly all cases, when comparing the same title between steam native vs non, the steam native install will work better due to this data being pre-compiled and provided by Valve.
To be clear, I wish it were different. But as stands, the $20 bucks I spent on RDR2 on sale was worth it. I spent hours fiddling with the epic games store version and never got it working quite right. I installed the steam version and it worked flawlessly on first boot.
Just when I thought I was finally gonna get to other platforms like GOG, steam has another feature to suck me back in haha