Steve Dembo is a genius. I won't go into detail about what he did, I'll simply link to his blog post titled, "Cell phone + Web cam + Second Life = Magic" and you can read his explanation and judge for yourself. More of a proof of concept at this point, but it's apparent it can be done and should only get easier.
If you're an educator who has spent much time in Second Life (SL) you'll quickly see the value. As the distance services librarian at my university, I can tell you that the ability to do what Steve accomplished is critical for those of us using SL to work with distance ed students.
IMO, Linden Labs (the company behind Second Life), should pay him for what he came up with, or maybe hire him.
This is another example of the incredible innovation taking place in SL and virtual worlds in general, much of it being lead by educators. It will only get better.