I wish I had cabinets I didn't have a use for. Storage is always a great thing!!! Don't you need a place to store videos or games? ...or do you want this spot to be more of a design statement as opposed to utilitarian? It looks like it may have been a bar at one time. You could bring that life back to it.
It's in the family room, but don't know if you have children, their ages, or perhaps you are emptynesters?? More information would be helpful.

Thanks for your ideas! Storage is definitely a great thing! Yes, I guess it could hold games, etc. We have a huge built in oppsite this cabinet area that could also hold games, books, movies, etc. I have several other pics of this room uploaded if you have a chance you might check them out, that might give you a better idea too.
Yes, my husband and I figured it had to have been a bar, but we don't drink, and yes, we do have children ages 13, 10 and 9.

storage for toys, games and art supplies. Pick up a couple of circular bar stools so the the kids can do their art projects there. That fridge will come in handy when the kids have sleepovers! Have the kids each paint a door for their stuff.

It would be an awesome reading/bed nook. Similar to what you would see in bay window. If you have storage built into the sides and bottom, the rest of the space can be used to "chill out" when all want to be together but not necessarily doing the same thing. Ex; two playing a game, watching TV, working puzzle, while the other is reading/resting. :=)

http://www.examiner.com/slideshow/48-totally-clever-alcove-bed-design-ideas#slide=38861751

I had a difficult time finding one to express my idea but this article has 48 ideas inside of it. :=) enjoy dexters 2012.

How about popcorn, pretzels, Raisinettes, extra sodas, and assorted other munchies that go with movie night? Maybe a fridge where the video game machine was? Extra blankets for stormy nights?

You could take the doors off the top cabinets, paint the insides in fun colors, and display trophies and / or collectibles there, and highlight them recessed lighting. Or create the look of recessed lighting without the expense with stick-on tap lights (go to amazon.com and put "tap on lights" in the search box). Then as others have mentioned, use the bottom cabinets for storage of movie-night supplies like snacks, drinks, blankets. I would updated the drawer pulls and cabinet knobs on the bottom with something brighter and more contemporary that color-coordinated with the colors in the inside of the cabinets above (for example if the display contained silver trophies, use a silver-colored knob. Or choose a bright color to go with the color you painted the inside of the above cabinets.).

In fact,if you type the words paint inside cabinets in the search box on houzz, and pick "photos" from the drop-down, you will get at least ten pages of really cool results of people who have done just that.

Remove the upper cabinet doors, paint the interiors a nice bright colour and mirror the back portion.
Paint the rest of the cabinetry - fun colours- could be retro teal? You could paint the uppers and lowers differing colours.
Make it a wet bar- a funky water bar- who said water did not need some fruit or veges in it?

Display the fun toys in the upper area and use the storage below for books,games/ etc. It is a family room , thus a colourful and happy space is what is required.
Also adding lighting would make this a far better space!
Enjoy!

Without the video game thing in the way ... turn that into a home office? Homework/family computer center?

Extend the countertop, but at desk height, to the right of the existing cabinets. Put open shelves and a corkboard above the desk, and stash the house's computer in the cabinets, along with the printer, scanner and all the rest of the stuff, on roll-out shelves.

Upper cabinets can be used for other storage, and the software CDs.

If the kids need to print, they can put the files on a USB stick and walk it over to the printer (trust me, it cuts down on the printing a lot if they have to walk to a print and load a file and print in public).

I'd paint the cabinets, too. to get rid of the "man cave" effect.

Paint (brighten), remove doors, update drawer hardware. Fantastic display area for collections of any sort including china, crystal, books, antiques, bill center/office or even carefree crafting,wrapping area! I can think of many uses and would love to have your situation! Lucky you!

A few years ago I had the formica re-done on the kitchen countertops.(I picked a color similar to the smooth cooktop) The cabinets were dark walnut look formica. That was painted white & had new doors made with bead board. It looks like a totally different room. The soft white light bulbs made things look drab. I use the daylight bulbs in the new overhead fixture. For yours, try paint and daylight bulbs first. You may not need to redo the counter or the hardware or the backsplash. Frosted window film would help you keep the light and eliminate the need for heavy drapes.

Do they have to stay? If you don't need the storage, I'd set them up as a work bench or gardening bench in the garage.

If you want to keep them, I'd replace the under cabinet lighting. Check out these puck lights with dimmer switch from Lowes. We installed these in out kitchen and love them.

http://www.lowes.com/pd_366540-53027-EC5055WH_0__?productId=3531602&Ntt=under+cabinet+light&pl=1&currentURL=%3FNtt%3Dunder%2Bcabinet%2Blight&facetInfo=

How far away is the kitchen,...you could make a snack center with a microwave, cooktop or wetbar and beer frig...how far is the plumbing from this location.

Well, if you could use storage - you could open up the space and paint the cabinets white or green - get a little more light in the corner. Also, you could take the doors off the top and have open shelving using colorful baskets or even frosted glass to let more light in. I would definitely update the lighting - some pendant lights maybe expand the bottom to a "bar" eating area - snack area for your 3 kids and their friends.

As you can tell from my comments - I would lighten and brighten - open up the space to draw people to use it. Mount a small tv or monitor for video games you could pull it out and make a nook for your kids that could double as a spare bedroom if you need one or maybe a home office - the appliances are getting used now right? So, I would make it fill whatever function your family needs most - privacy for a 13 year old or personal space for Mom and/or Dad. It is a great space to fool around with - your budget could constrain you as well. You didn't say if you had one - I assume everyone ha some type of budget.

Good luck and have fun!

Wow! Thank you all for the awesome ideas and suggestions!!!!!! Love them all!

To be honest, we really like the idea of taking the doors off the top cabinets and doing something fun with that. I had not thought about the recessed/puck lighting, but that sounds like a great idea as well. If we do decide to keep the cabinets, we will definitely be updating the hardware for sure :-)

You all have definitely given us a ton of options to toy with. To answer a couple questions: The kitchen is upstairs. I think it would be neat to incorporate a snack/eating area here, but I really would rather keep the food upstairs in the kitchen/dining room :-)
As far as budget, we don't have a specific number in mind, but considering we are buying the house and have several other projects to do, we would like to keep the cost under control.
As far as the cabinets needing to stay, no they do not have to stay! The storage is not necessary. We actually have tons of storage. Everyone has given us lots of great suggestions on how to incorporate them in the room, which we love, but we are still open to the idea of taking them down. They would make a great work space in the garage! :-)

Again, I hope I hit on everyones posts. If not, I do apologize, because I didn't aim to leave anyone out. Thank you all again SOOOO MUCH for all the great inspiration! I will definitely keep you all posted on whatever we decide and as we move room to room, I am sure I will inquire about more suggestions.

We are all drooling for the storage.

Since you will soon have three teens: turn the area that was occupied by the arcade game into a "phone booth" for taking their friends' calls. Or, it would also be a great spot for holding the laptop and printer.

Place a long table in front so they can spread out those school projects.

Brighten the whole area up: indoor/outdoor carpet under table, different color knobs for cabinets, colorful tile counter. With the upper cabinet doors gone the area would be great for books and games. Have fun!

Hockey here. You answered all my questions and it seems as though fellow Houzzers beat me to providing helpful ideas. Keep us posted. I'd love to see what you ultimately decide.

If you are not keeping the cabinets there it would be good to make a 'reading nook' with a comfy bench seat for the kids to sprawl on and hopefully read a book, or at least read their texts and tweets which is all my teenagers seem to manage these days. My sons seem to like having a private space, but like being near the rest of the family so would love a spot like that. I agree with your thoughts on keeping food in the kitchen!