Advertising in virtual worlds is still in its infancy. Advertisers, as well as world builders are still fumbling around trying to figure out what works. One interesting approach is Doppelganger's vSide, which just previewed on the Worlds in Motion blog. It's a new social world that attempts to emulate a real world urban environment. Realism is seen by Doppelganger as a way to integrate ads into the environment in a way that users won't object to.

The world looks gorgeous and they've applied many touches to the animation to make the avatars seem natural. They are also planning various games and social events with special content as a reward for players. One feature revealed was a public reputation statistic associated with every avatar that increases as you add friends, explore, or earn applause from other users. Having a low "respect" statistic may actually lock you out of some content:
Some clubs won't let you past their exclusive velvet ropes unless your stats are high. It's a good way to encourage and reward socialization -- and, moreover, make vSide's society resemble a real one.
Of course, this type of system is begging to be gamed. If this was the way it worked in the real world we would have nothing but devious social schemers and neurotic attention-whores for celebrities... *cough*
Kaneva was criticized for this kind of thing when they only allowed people with a threshold number of "friends" in their profile to enter their virtual world; a policy they soon dropped. vSide is still in the Alpha stage, so we'll have to wait to see what the final implementation of the "respect" score ends up being.
Regardless, Doppelganger seems to have made good headway towards creating a realistic environment. We'll soon find out if realism is what people want in a virtual world.
As with all virtual worlds, the key to serious (as opposed to limited) success is user creative freedom.
The downside is the great quantity of stuff other users in the same space might find offensive or junk :)
so is vSIDE takin over the lounge beta cause the lounges home page says vSIDE WILL BE COMIN SOON