Keio University bioengineers have demonstrated the control of a Second Life avatar using a non-invasive brain-computer interface. The news release is in Japanese but the Neurophilosophy blog reports that the device monitors electrical activity in the motoro cortex via external electrodes on the scalp. A video demonstration is also available on the site. From Neurophilosophy:
All a user has to do to control his/her avatar is imagine performing various movements. The activity monitored by the headpiece is read and plotted by an electroencephalogram, which relays it to a computer running a brain wave analysis algorithm that interprets the imagined movements. A keyboard emulator then translates the data into signals which can be used to control the movements of the user's on-screen avatar in real-time.