Advertisers have started to buy billboards in racing, sports, and action games, but these aren't the only branding opportunities, said Henry Jenkins, a comparative media studies professor at MIT. He pointed out that characters in the "Grand Theft Auto" series interact with different media.

For example, fake magazines are sprinkled in offices throughout its virtual cities; players also interact with different radio stations when driving a car. In fact, Jenkins noted that a few record labels have used these radio channels to promote new artists to "Grand Theft Auto"'s predominantly male 18-34 crowd. Many games, like Tom Clancy's "Splinter Cell," have TV monitors in the backgrounds of their virtual department stores and office buildings--and Jenkins said there's no reason these couldn't be showing commercials.

"We live in a branded universe," Jenkins said, adding that gamers appreciate it when their virtual worlds feel more authentic. Anything that adds to the immersiveness of a game is welcome by gamers, but he said the responsibility is on marketers to advertise tactfully.

The downside is that no one is quite sure how much gamers will put up with. A bad example, Jenkins said, would be Best Buy--which received an award for worst product placement from a popular game site for placing a huge virtual company store with its big logo at the finish line in a racing game.

As Jenkins noted, gamers aren't always happy about product placement in their virtual worlds. In some massively multiplayer online role-playing games, Jenkins said upset gamers have been known to band together, creating their own in-game protests. They make signs or participate in "sit-ins"--blocking entrances and exits to rooms they refuse to leave, which disrupts the game and frustrates developers.

But games can also be great places for consumer-generated word of mouth. Jenkins noted that one gamer in the Sims Online recreated a whole catalogue of Ikea furniture. "Is this a case of copyright infringement? Or viral marketing?" he asks.

According to Larry Gerbrandt, senior vice president and general manager, Nielsen Analytics, "$60 billion in TV billings is up for grabs." He said that money will go to branded entertainment like video games. A recent Nielsen Media Research study shows that product placement in video games generates a 60 percent lift in awareness. "Brand integration can, in many instances, outpace the impact of its ad counterparts," Gerbrandt said.

The Yankee Group, another research firm, predicts that video game advertising will reach $800 million by 2008. Jenkins said the numbers could be even higher once the next generation of Internet-enabled Playstation and XBox consoles hits stores later this year. Real-time ad-serving, currently "a minority practice, could potentially explode."

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