The joke, written by a game backer, is a tombstone reading "The last woman he bedded, turned out a man, and crying in shame, off a cliff he ran." It's an instance of the idea that trans people are "traps" for unwary men to fall into and be shamed. And let me be clear: this idea kills people. Not in the way it's told in the joke, though. It kills trans people, murdered by men, or driven to suicide by the world around them.
OK, but it's fiction. Bad stuff happens in fiction, and we're sophisticated enough to tell the difference. When a protagonist uses heavy weaponry to solve problems, or gets into a creepy but sexy relationship, we understand that this is fun exactly because it's a made-up world where this stuff isn't a horribly bad idea.
But stories about how the world works, even in fiction, still reinforce the power of those stories, exactly because they're not marked as the fictional bits. Pillars of Eternity is a fantasy game about the fiction of heroism and magical healing potions. Most things still work exactly like in the real world, though. Mugs still hold liquids. Gravity still points down. People still require food, and don't photosynthesize.
Intentionally ridiculous analogy time! Let's say there's a stubborn folk belief that people with hazel eyes are venomous. They supposedly have little fangs, and their bites cause paralysis and death. As a result, they tend to get killed on sight. This belief is utterly false, and there's been an increasing push in recent decades to stop anti-hazel violence.
Now there's a fantasy game with a tombstone of some guy who died from a hazel bite. The fantasy game isn't about eye colur. It's about heroism and magic. The idea of hazels being venomous is treated the same as the idea that mugs hold liquids. It's not part of the fictional bits that differ from the real world.
This has two effects. There's a background reinforcement of the idea that hazel-venom is "the way the world is". Sure, you might have seen the posters and the news items and the impassioned rants. But in the rest of your life, the hazel-venom idea is still repeated in this off-hand manner. Would you really want to be alone with one of them? Maybe not, just to be on the safe side.
The other effect, of course, is that reading this tombstone is a kick in the teeth if your eyes are hazel. It's yet another reminder of how most people still believe you're venomous, of how you have to be careful on the streets at night, of having to wear those bloody brown-coloured contact lenses and hope that they never slip at the wrong moment. Of your hazel-eyed friend who went on holiday and never came back.
The bits of fiction that aren't clearly fictional reinforce what the real world is assumed to be like. When these assumptions are dangerously wrong, people do get hurt by fiction.
Notes: The analogy is intentionally a bit silly and not meant to set up an equivalence or diminish the suffering of trans people. I'm not trans, but did get this essay reviewed by trans people I know. I do have hazel eyes. Comments are on right now, but note my moderation policy is anything but subtle.