Nerfnow! - Cleavage
The game is Dota 2 and the tentacle monster is an original character from the comic.
I know the urban dictionary says otherwise, but I define fan service as, "Anything done by an entertainment outlet or changed about an intellectual property for the sole sake of appeasing its fans". You can define the term however you want, but I consider 'fan service' to include more things than just the addition of content oriented with sex appeal. Capcom's inclusion of Phoenix Wright in Ultimate Marvel Vs. Capcom 3 was more or less done to appease the large number of Capcom fans who voted for him in polls. I'd define that scenario as 'fan service' and it is far from being oriented with sex appeal.
And just to be clear, I'm not saying Valve's full of idiotic perverts or anything. In fact their games have MUCH better female characters than most current gen games do. However, a posting on TV tropes (which I will admit is hardly the greatest information source) tells me Valve likely added in the flirting because of how obsessed some fans got over the whole Chell+Companion cube thing (I.E human/machine shipping). So yes, even if it isn't a fraction as shameless or blatant as other forms of fan service I would still define it as such. Though there's always the possibility that the flirting was added with absolutely no thought of the, uh, 'creepier' side of the Portal fandom in mind and was nothing more than another one of the game's jokes, it didn't really feel that out of place with the rest of the game's humor.
Um, what game is this? I don't remember and Valve games that had a succubus or tentacles. (HL2: Ep 2 hydra doesn't count, since it's only in the beta game)
Flirting isn't really fan service, Chell deliberately and slowly removing bits of her suit for better mobility would be closer.
Valve avoiding fan service? Ha! Why exactly did the personality cores from Portal 2 acted flirty with Chell at several points in the game? Though I will give them credit for at least being subtle about it.