You know you're at a virtual worlds conference when someone introduces himself as a 'metaverse evangelist'.

Or when they slip a sentence like 'the true embodiment of convergence is immersion' into conversation without flinching.

Or when one of the speakers is a tall, for the most part masculine-looking man called Jessica with gristly hair and a French manicure.

In fact, pretty much everywhere you looked at this week's Virtual Worlds Forum in London there were signs that this was a world most people scarcely know exists, and whose inhabitants fringed on the delusional and the visionary.

In a barely lit room in a warehouse in Kings Cross, London, a discussion group was debating the topic 'From e-tail to v-business: are virtual goods an entirely new category?'

In an adjacent area, companies with names like Electric Sheep Company and Rivers Run Red were saying things like 'we've been in this space since 2003 and now, finally, it's vindication.'

And, as television screens showed cartoonish 'avatars' - virtual versions of real people - frolicking and interacting, Vodafone talked about a service which allowed people to send 'virtual text messages' from Second Life to people in the outside world.

Across the breadth of the venue, whose dark walls and nightclub interior gave the proceedings a slightly Matrixesque feel, people were hunched over laptops - their faces lit by pools of blue light - messaging, blogging, Twittering, generally conspiring - or so it seemed - to render the real world obsolete.

The deep fried chicken kebabs, at least, were real.

While most in the real world still languish in a position where they don't know what a virtual world is - the name 'Second Life', it's true, probably draws less blank looks than it did a year ago, the virtual world community itself is forging ahead.

Many major companies, among them Coca-Cola, IBM, Boots, Reuters, and AXA, now have an office in Second Life, and increasingly their minds are turning to what, precisely, they're supposed to be doing there. ('How do we leverage this investment?' is the way they'd prefer to put it. According to Forrester, a large company might pay anywhere between £250,000 and £1 million to set up Second Life premises.)

The revenue model most often flagged up for virtual worlds is advertising, where platforms like Second Life are paid to host billboards and the like of companies hoping to appeal to the world's 'residents'.

But for those companies themselves, another money-spinner is emerging: 'virtual goods', where consumers pay money for objects that do not exist - a piece of virtual clothing, a 'skin' (a 'look' for their avatar), a virtual island where they can build a virtual house.

In the 'from e-tail to v-business' seminar, panelists rapidly moved from discussing whether there was a marketplace for virtual goods - there clearly was, they agreed - to whether such goods could ever be 'limited edition', in much the same way Prada dress might be. (Clearly, being digital, such an item could have endless copies of it made.)

David Orban, chief executive of Questar, a software firm, thought they could: "I disagree with the idea that it's not possible to regulate supply. [The goods have] an artificial scarcity, but there can still be a rarity factor," he said.

Elsewhere, the talk was of whether there was any way for a company to protect its interest within Second Life, given the it was a public platform and 'residents' were free to do what they liked. (There have been several instances of sabotage.)

IBM, the technology firm, said it was watching "with rabid interest" a new feature called 'the Grid' in Second Life, which allowed companies to develop a private area without fear of public interference.

Participants acknowledged that virtual worlds have not yet got their interface right. Valerie Williamson, a vice president of the Electric Sheep Company, a consultancy, said that Second Life had been hampered by the fact that it was "difficult to understand and to navigate." Her company was showcasing a new viewer which made the whole experience "a bit more like using a web browser."

On the whole, though, the mood was upbeat. Dele Atanda, a digital marketing at Diageo, the drinks firm, captured the sentiment of many when he said: 'There's little dispute that the 3D internet is the future.'

Whether the soothsayers at this event are correct remains to be seen. But if anyone's bold predictions about the future of interactive media warrant taking a wager on, it is theirs.

For if science fiction is the literary genre that has worked hardest at imagining the future - in all its beauty and horror - then virtual worlds are its online equivalent. Only, of course, its impresarios talk more about the beauty than the horror, for now.

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