Because business executives are just now discovering virtual worlds, it is perhaps not surprising that individuals are responsible for most of the economic activity: In the virtual world, at least, mom-and-pop outfits trounce big corporations. Take the case of Christopher Mead, a 36-year-old former factory worker and a stay-at-home father from Norwich, England. He sounds like just about the complete opposite of a cutthroat businessman. "I came to Second Life because I wanted to get away from conflict and people who put greed ahead of other people's feelings," he says. "I'm no businessman; I'm not constantly looking for ways to squeeze more money or to cut costs."

Since gravitating to Second Life for entertainment, though, Mead has become a successful entrepreneur, opening up four shops, all of them called Bits and Bobs. Using an animation program, Mead creates and sells unique dances, walks, and other activities for avatars, particularly couples, to do together. People from all over the world not only give Mead suggestions for new creations but are also willing to pay good money for his offerings. And because Linden dollars, the currency in Second Life, are convertible to U.S. dollars, this is real income; Mead says it varies, but he makes about $1,700 a week from his sales. In fact, both Entropia Universe and Second Life say they have thousands of people who make a profit from what they do in a virtual world. People who use Entropia can even use an Entropia Universe Cash Card at any real-world ATM in Europe to withdraw money earned in the virtual world.

The growing popularity - and influence - of virtual worlds raises some important questions. Castronova envisions the onset of a slew of policy and legal issues. "You realize what is happening inside Second Life is an economy and that real values are being exchanged. What a disaster if the government decided to intervene, regulate, and tax," he says. "On the other hand, if Second Life says its currency is freely liquidated against the U.S. dollar, why should that be tax free?"