I am a HUGE fan of Screencheat (http://www.samuraipunk.com/screencheat.html). It's a splitscreen multiplayer FPS in which other players are invisible, so you have to track them based on seeing their perspective in their own screen. Vibrantly colorful levels full of unique landmarks make it easier to tell the general area someone is in. It makes for very fast paced, hilarious fun. It supports anywhere from 2-8 players.
For something a little more standard, Left 4 Dead and the sequel Left 4 Dead 2 are both a lot of fun. Cooperative FPS for up to 4 players (or 8 in versus mode) about surviving a zombie apocalypse. Teamwork is crucial to help players who are under attack and to avoid accidentally shooting each other instead of the enemies. Absolutely great fun, you can easily sink hours into Left 4 Dead with a friend or three. It is worth noting that, while the games are $20 each, they often go on sale for $5, so it could be worth waiting for that.
Left 4 Dead 1's Steam page is here: http://store.steampowered.com/app/500/
And Left 4 Dead 2 can be found here: http://store.steampowered.com/app/550/