Mitch Kapor and Philippe Bossut from Kapor Enterprises designed a interface prototype that makes it possible to operate Second Life with out a mouse or keyboard, and called it Hands Free 3D.
3 months ago they started to work on this idea, they modified the open source client to support a 3D camera as a input device. This following YouTube movie demonstrates the possibilities:
It is pretty good what they already got done, but one does wonder how comfortable it is to navigate this way, it might be fun for a presentation, but I'm skeptical if this really is a superior control system. Besides they don't show a example of building, which I'm more interested in. I can envision something where you pick up prims and mod them with your hands.
They mention that 3D cameras aren't available for the mainstream yet, but I would think a larger screen or a beamer would be needed to, to better see where you are.
It is a cool development, and it is only the first phase. Now we have to figure out how this could be best used.