There's been a lot of speculation recently about the possibility of a Google virtual world.
Google Earth CTO Michael Jones insisted (first comment after the post) in January that Google Earth would always remain true to the real world and not dive into the type of fantasy world that Second Life has become. Therefore, Google's implementation would be more like "First Life," but in virtual form...
Instead, it makes sense for Google to mesh a bunch of its tools into one, thus creating a whole new advertising opportunity aimed at people, er, avatars, who are "walking" down virtual (real) streets to check out virtual (real) stores and businesses. And if Google wants, it could incorporate some of its more social ventures, such as social networking site Orkut and Google Talk, in order to motivate users to spend more time there.
But why even have avatars in the first place? I don't see Google trying to nudge in on the MMORPG market, not even into Second Life's quasi-game status. The potential of a serious expansion of Google Earth should be apparent--the ability to experience real places, without being there.
The difficulty is that in those real places are real people--a whole lot of them, in places where people are most likely to want to virtually 'be' (Times Square, Shibuya Crossing...). No photographic representation of those places can remove the people from them--nor would you probably want to. Real-time representation of those places would be the holy grail of virtuality, and would be possible with an array of cameras and clever interpolation technology. Personally, I'd rather inhabit (or rather, visit) those places disembodied, in a real-time crowd of the people who are actually there. A disembodied, first-person view more closely simulates the human experience than the third-person camera view common in most games.
Social networking on top of this construct could have huge potential--but is a separate consideration. The experience of presence, along with the ability to shop in the actual local retail stores, would be a novel enough lure for me and millions of others. Google won't be focusing on a 'virtual' world, but rather on the real one.