Check it out: Shidonni - Shidonni is is a virtual universe, where you can create your own imaginary world and interact with others. Shidonni believes in creativity, and offers kids a friendly, non-violent and safe environment to match. (link)
"Shidonni is a fast growing virtual world for kids and a children’s created content service leader. Shidonni is based on the timeless joy of drawing, with a 21st century twist. After drawing their virtual pets, children play with them as they magically ‘come alive’ in the world of Shidonni." (link)
Here is a guide for using Shidonni. Click on "full" in the tool bar at the bottom of the slide viewer to see a full screen version.
Shidonni requires Microsoft Silverlight to run. Mac users and older computers may have problems....:-(
Thanks to Ben Parr at Mashable HOW TO: Bring Animal Drawings to Life for the heads up!