[Video Link] Last night my 8-year-old daughter and I played Skylanders: Spyro's Adventure (we have a Wii and it is available on the other console platforms and the PC as well). We had a great time playing the game, which is geared for younger players but has sly humor that kids and adults will enjoy (is was written by Toy Story writers Joel Cohen and Alec Sokolow).
The game comes with a "portal," which is a wireless peripheral that you place 3D action figures (included) on to have them appear in the game. The action figures contain an RFID chip (or something like it) that the portal scans and sends to the game console, and the new character immediately gets swapped into the game.
Skylander's Spyro's Adventure Starter Pack comes with three characters, and additional characters (which have different abilities to help you on your quest to save a world from destruction) cost about $(removed) each.
A friend of mine named I-Wei Huang (who I met when I saw his amazing steam-powered remote control vehicles at Maker Faire a few years ago) designed many of the Skylander characters. The above video is a cool speed drawing he made using Sketchbook Pro.