Wonderland looks like a great free online role playing game for younger students. The game is based around the story of some travelers who become shipwrecked and have to survive by doing various tasks, quests and challenges. The graphics look like the typical Japanese manga cartoons which are so popular with kids and teens.
What I really like about this is that the 'things to do' type quests and challenges are already there and built in so , unlike virtual worlds like Second Life and There.com you and your students don't have to think up things to do.
I think this is really good motivating game to get students using English to solve problems and work collaboratively. If you can get your students hooked on a game like this they'll do the learning for themselves.
On the negative side, they will need to download the software and that's over 500Mb, so they'll need broadband and a reasonably up to date computer. The game is also quite complex and I can't find any information regarding minimum ages for registration.
That said, if your students are keen gamers and have an intermediate level of English or higher and you want to motivate them to work on their own, this could be a wonderful tool for getting them to do that.