I'm using Yahoo Live to get a look at the Yahoo UCSD Hack Day event, and I'm quite surprised at how well it works.
Seeing someone's face via their webcam is an absolute waste of time, particularly on on video conference calls, but here I'm looking at a view of the room in the larger window, and at several of the hackers in smaller windows. This is actually a pretty workable virtual office. I can see Paul eating Pizza, Rasmus helping people, and the group I was sitting with mostly still there. I half feel like driving back over and re-joining the group.
Why is this useful? Well, for one, I can see people working, and it motivates me to stay up and work. Compare this to having no communication, just email, or IRC, and you'll see it provides a much more tactile, real-world feel. I can see and hear the activity.
I could actually imagine a technology like this being useful for virtual office. Kind of like hanging out on IRC/IM, but with a more human feel.