Greg Cato posted an excellent article on overanalyzed.com discussing the ins and outs of the MMO economy. That is the buying and selling of in game items for real world currency. It is well worth a read!

Let me preface this by saying that I personally approach MMOs in a different way than most people. While most play for personal enjoyment, I come to them looking to make money. Obviously, while I do still enjoy the time I spend playing the games, I'm much more interested in crossing the boundary and selling my expertise and services in game for real life money. For those of you unaware, there exists quite a large economy (~$800 million per annum) of people buying and selling things for online games. The large majority of the volume of these transactions takes place via buying and selling liquid assets, ie currency.

The complete article can be read here.