Keiko Takamura has figured out a way to sell her music inside the Second Life virtual world. Using a rough approximation of an iPod that she calls the myPod, Takamura allows Second Life citizens to preview her music and buy songs in the MP3 format using Linden dollars. The transaction happens entirely within Second Life, but the customer walks away with an MP3 that can be played outside the game.
For artists who want to try this but don't want to put together their own myPod, SecondTunes offers a similar service to anyone who wants to sell music in Second Life.
Interestingly, SecondTunes also lets you sell anyone else's music within Second Life, essentially becoming a virtual distributor. In order to do that, you would need to pay the Harry Fox Agency real dollars, though: a one-time per-song fee of $15 and 9.1 cents per song (assuming Harry Fox can license the songs). More details are available here. You can only license 150 songs at a time, so forget about opening up your own iTunes-sized store, but for $28.65, you could buy a license to sell 150 copies of a song at whatever price you want.
SecondTunes currently counts about a hundred artists on its roster. Songs generally cost L$200 to L$400 (Linden dollars) apiece.
(New World Notes; via Music Ally; image courtesy of Keiko Takamura)