Researchers at the Rensselaer Polytechnic Institute have created an AI that expresses itself through Second Life. Eddie, as the AI is called, is able to reason and form beliefs on a level equivalent to that of a four year old. What makes Eddie interesting is that it ends up developing a theory of mind, which children do around age four, and is thus able to form beliefs about the beliefs of others. This ability is what allows Eddie--and children over 4--to pass the Sally-Ann test, as is shown here.
To pull it off, behind the Eddie avatar is two systems: one is the theorem prover, the logic-based AI that reasons and forms beliefs, and the other is an NLP system to convert conversational English to formal logic.
This is pretty awesome stuff, though not exactly the strong AI I'm assuming will come eventually.