While it's certainly a pioneer, American Apparel is far from the only company exploring the potential of virtual worlds. When Warner Bros. Records was getting set to release a new CD by one of its artists, Regina Spektor, they set up a listening lounge so avatars could sit around and hear some of her new songs. The room was designed to look like a New York loft and had a coffee table with a book on it that people could leaf through to learn more about the artist. "Their goal was to create awareness and to create a fan base and, just as importantly, to generate sales for her music," says Linden Lab's Fleck.

There are plenty of other examples of companies trying to harness the power of virtual worlds. Vexed Generation, a British clothing company, tapped the opinions of the members of Entropia Universe, which was created by the Swedish company MindArk,­ about new clothing styles and inventory in its actual brick-and-mortar stores. "Never before had they had such immediate feedback from the end customer," says Marco Behrmann, chief information officer of MindArk. "They were thrilled and even got a new computer in order to more efficiently talk to the Entropia participants."

Massive Incorporated, an advertising agency recently purchased by Microsoft, supplies ads that appear on billboards inside Entropia. In Second Life, Warner Bros. held a premiere for X-Men 3, complete with avatars who represented Hugh Jackman and Halle Berry and walked down the red carpet. Major League Baseball built a replica of Pittsburgh's PNC Park, the host of this year's All-Star Game, and ESPN did a simulcast of the home-run derby into the virtual world, with avatars who represented sluggers like Boston's David Ortiz and the eventual winner, Philadelphia's Ryan Howard.