Some game development companies do work with distributed teams (people not in the same city, state or country). It is generally for smaller projects such as mobile, hand-held, web based games etc. games where you have a small team and thus a small communication overhead. It becomes much harder for large console/PC titles just because of the level of communication necessary between team members on a daily basis. On a small indie project remote working may be essential as the team may not be able to afford an office and so everyone will need to work from home. In more mainstream commercial game development remote working is rarely an entry level position. You will most likely need to have some proven experience making games if you want companies to trust you to work at a distance.
