We're pretty sure these two pieces of software were developed separately, but both MIT and Sony have come up with a way to take hand-drawn sketches and turn them into little worlds with embedded physics engines. Sony's uses their PS Eye to take either hand-drawn objects or just stuff they have laying on top of a paper and animating it into a little world. One awesome example is scanning in a hand-drawn tank and putting it into a tank battle game (which another Sony employee messes up by bringing in a real tank). Check out these three videos after the jump.
MIT's example below shows a whiteboard application in windows that takes what this y draws (in Paint, no less) and renders it in motion. Quite neat, but not quite as cool as Sony's. [TechEBlog]