In my experience, I've only seen contractors being commonplace in indie development, and hardly ever seen them used at the top end.
5 hours ago, GeneralJist said:
I heard that the 2 biggest reasons hourly is more common is because of crunch which is overtime related, and because most game companies work on a project basis.
Crunch/overtime is generally used by companies to extract extra free labor out of the workforce, so they'd definately want do this to salaried employees (who's remuneration is a fixed annual price). If they did it to hourly employees they'd have to pay for it!! 
When companies work on a project-basis and fail to line up back-to-back work, they seem happy to just to fire all their salaried staff
I know things are very different in the US (where "workers rights" == "what are you soviet Russia!?"), but here in Australia, you can't just treat anyone as a contractor because you say so. A contractor is free to decide how to complete their tasks, provides their own tools, is free to delegate to sub-contractors, and is liable to correct defects in their work. Everyone else that doesn't fit that description is an employee and is protected by a standard set of workplace rights. Simply calling someone a contractor (when they fit the definition of an employee) to try and dodge your responsibilities towards them is illegal here.
5 hours ago, Tom Sloper said:
If you're going to work in QA, expect to work hourly
Probably depends a lot on the type of company, but at all the studios I've worked for, they had an in-house full-time / salaried QA team just like the rest of the development team. In the indie scene, most people seem to outsource QA at the end of a project, so hire a QA company for temporary services (who might in turn have salaried or contract staff). At really big companies (outside my experience) I imagine that yeah, they'd probably hire an army of QA staff on short-term contracts in the lead-up to a release.