For those who want to start simply and have fun or for those interested in high-end simulated learning environments.  A mix of free, open source and commercial tools:

1. Doppelme -Create a simple avatar. This is a very easy to use and free tool to create a basic avatar. Simply choose the characteristics you want.
2. Voki -Create a speaking avatar. This free tool lets you create a speaking avatar.  Once again choose the characteristics you want for your avatar, as well as the voice you want and then add the voice.
3. SitePal -Add a speaking avatar to your website. Service that lets you create a speaking avatar for your website, and provides more advanced functionality.
4. CodeBaby -Create and integrate 3D characters into courseware. This is a similar tool letting you provide a speaking avatar for your website or courseware.
5. Vox Proxy -Add 3D talking characters to PowerPoint. This tool lets you download characters to use in PowerPoint presentations - works with XP but not Vista.
6. 3B rooms -Create your own personalised 3D space. You'll need to download the 3B browser to experience 3D websites, where you can co-browse with others.   as well as turn a 2D website into a 3D version.
7. Second Life -Join the world's largest 3D community. No list of 3D tools is complete without SecondLIfe the biggest 3D community in the world. Second Life is already been used quite extensively in some educational and training organistion.
8. Open Sim -OpenSim is an open source 3D application Serve that can be used to create a virtual environment (or world) which can be accessed through a variety of clients, on multiple protocols. Out of the box, OpenSimulator can be used to simulate a virtual environment similar to Second Life™ (including client compatibility). 
9. Forterra OLIVE -Forterra’s On-Line Interactive Virtual Environment (OLIVE™) is a software platform that enables customers to deploy their own persistent and secure 3D Virtual Worlds where users can collaborate over networks using rich media.
10. Protosphere -Create a virtual collaboration environment. ProtoSphere takes collaboration to a new dimension by removing the barriers to communication and creating a persistent, socially networked environment where real work gets done.
11. Project Wonderland -Open source toolkit for virtual 3D worlds. The types of collaborations that can happen within the space include audio communication, live desktop applications of all kinds, and eventually collaborative creation of world content (both graphical and procedural).
12. ThinkingWorlds -Rapid browser-based virtual worlds tool. Thinking Worlds is a 3D engine and authoring envrironment that lets designers to create and publish highly immersive simulations -fast.