This is just the beginning, but the guys at GoogleEarthHacks have created a game using Google Earth. This is a war game which they claim is largely text-based. The object is to grow armies which you place at various cities and try to hold the cities. There is a GE KML file which lets anyone view the “action” (more like a status) of the game.
This is the first of many games I’m sure will be created using GE as a visualization tool. I expect to see more direct, or interactive, use of GE to play a game soon.