Synopsis: Virtual items are actually just clauses in a vast, constantly-changing service contract with a game company. Microsoft Excel is used as an illustrating analog.
In order to understand how people can pay real money for virtual items and virtual currencies, you have to remember that all real world money is transacted between real world people. So when in doubt, look at everything from the standpoint of the real world. Thinking about a virtual item as a thing that has actual value just walks us down a garden path to confusion. A virtual spoon is not a spoon because there is no spoon.
So what actually is that virtual spoon? It is a portion of a service agreement between you and the game company. It is like a dialog box in Excel. It's a feature of the product. If Excel were a free product where Microsoft charged a one-time fee to enable the Search feature, it would be just like any of the MMOs that begin free and then charge for items. That's because those virtual items are merely product features. They change the user's experience of operating the product.
Buying a spoon for your character to do battle with simply changes the features of the product that are available to you. It is presented such that you see a spoon. In Excel, it is presented such that you see a dialog box. Either way, there is functionalty and appearance, and you gain access to them by paying money.
The notion of a spoon as a service feature gets a bit confusing when we start talking about trading spoons in the virtual world. To stay on top of things, let's go back to the Excel analogy. Imagine that everyone who uses Excel is operating on the same spreadsheet. It's a huge spreadsheet, some millions of cells in each dimension, so there's room to find a spot for your data. In that environment, you bought the Search feature, which gives you a Search dialog. I haven't paid for that, so I can't search. But per the functionality created by Microsoft, you can let me use your Search dialog. Regardless of how this is accomplished, you are in some way letting me use a service feature that you originally obtained from Microsoft.
This is the same thing that happens in an MMO when one player gives an item to another player through their characters. It is simply the use of the product as it is coded. It permits one player to transfer the right to do certain things to another player. We think of it as a transfer of virtual spoons, but in fact there is no spoon. There is only the right to use the MMO as if there was a spoon.
Because you paid money to be able to use the Search feature, it only makes sense that value would be associated with it. If you were to transfer it to me, then I would have something of real world value. It makes sense that I would give you something back of real world value. I might give you something that is related to the software, whether an MMO or Excel, or I might just mail you a check.
We also place value on our time. If it takes me 10 hours to operate a product to get a certain result, then I will associate 10 hours of effort with that result. If my time is valuable to me, then I expect to get some value back from someone if I transfer that result to them. If I've worked for 10 hours to get to a certain spreadsheet built, then if anyone wants that spreadsheet, they have to offer me something that I value. They might offer me a Search function in return, and I might accept because I never went and paid to have access to the Search function. And all that is an analogy to someone in an MMO spending time to obtain a certain game item that they then want to sell to another player.
Ultimately, it's just a change of the way that the software can be used, not transfers of items.
Some are wondering why I'm going on about this. It's important to understand what virtual items are and are not. When people lose track of reality, they start to do things that no longer make sense. The case of the Habbo Hotel property thefts tells me that the judicial system hasn't lost its way yet. The crime there was not the theft of virtual items, but the fact that somebody connived to transfer rights to a product feature from its proper rights-holders to themselves.
As a point of contrast, consider that soulbound items are a modification of the service agreement that I've been discussing. With the soulbound service agreement, you cannot transfer the service associated with soulbound items to other players. That is part of your agreement with the game company. The right to use a soulbound spoon cannot be transferred to another player's account so that they can use it. The game provider has implicitly stated that that was true as part of the game contract. The right to use the Search function cannot be turned over to another user in Excel because the Search function is soulbound.
So the next time you break out that spoon to do battle with the uglies, and thrill over the fact that it just proc'd Greasy Mess for the third time in the fight, remember that there is no spoon. There is only the agreement that when you push certain buttons, something that looks like a spoon gets waved around on the screen, and the Greasy Mess effect will be applied to the opposing avatar.
It's all awfully clinical when you get down to it, but that's where the truth lies. Down in the nitty gritty details.