Digital toys and Web sites for kids have had a mixed history. But the future is so full of techno-savvy kids that toy makers are finding they have no choice but to move into the digital realm by providing better online entertainment, as well as digital toys in the physical world.

Mattel (MAT) is going to do that by making its first full-scale appearance on the show floor of the International Consumer Electronics Show, which features a Kids@Play Summit this week in Las Vegas. Among the moves Mattel is announcing is a complete revamping of its online strategy, which will now target everyone from small kids to adults to bring out the “kid in all of us.”

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When the chief executives of the Big Three automakers went to Washington, D.C. with tin cups in hand asking for a $25 billion government bailout, they triggered public outrage when it was revealed they’d flown in on luxury private jets. With shareholder and taxpayer frustration growing, companies are starting to see corporate jets as a liability.

That’s where Silicon Valley’s XOJET airline comes in. The San Carlos, Calif.-based airline provides a kind of private jet time-sharing service for corporations. Sure, it’s not your typical Silicon Valley start-up. But it’s an example of how innovative thinking can re-engineer an entire industry.

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Games are starting to catch up with movies in this respect: Low-budget titles from indie studios have the same chance to succeed as blockbusters. And the indie game makers are about to make their biggest strides yet as Microsoft (MSFT) prepares to sell user-generated games on the Xbox 360 game console.

The launch of the Xbox Live Community Games Channel on Nov. 19 represents the biggest step yet toward embracing games made by professional independent developers, amateurs, students and ordinary gamers. The games launched on the channel, which will start in the dozens, will be available for 14 million-plus Xbox Live gamers to purchase for fees ranging from $2.50 to $10. The game channel is a part of a big makeover for the Xbox Live online gaming service.

Anyone who uses Microsoft’s $99 XNA Game Studio Express tools can create games that run on the Xbox 360 or the PC. More than a million tool sets have been downloaded.

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The Web is abuzz with how vice presidential candidate Sarah Palin’s email got hacked. Hackers who obtained Alaska Gov. Palin’s email password apparently used the “forgot my password” feature of Yahoo’s email service.

The hackers evidently used information they knew about Palin–her zip code, date of birth, and that she met her husband in high school–to convince Yahoo’s service into assigning a new password for Palin’s email account.

PC World notes that the security question that Palin chose didn’t turn out to be so secure. Most online services ask questions that only you should know. But in Palin’s case, it must have been something that could easily be guessed, given all of the public information available about her.

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Google is the sleeping giant when it comes to advertising in video games. While the company dominates search advertising, it has yet to make a big splash in video games. That could change soon, as the company has been quietly testing its “AdSense for Games” product for months.

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As the video game industry gears up for its annual E3 conference in July, the reality is setting in that the one-time entertainment extravaganza has become narrowly focused on console games, with very little room for PC games.

Even Microsoft and Intel, the champions of the PC, have conceded that point. Intel isn’t holding any press conferences or functions at the show. And Kevin Unangst, senior global director of Windows gaming at Microsoft, said his team decided to show off PC games at an event in San Francisco this week to avoid being overshadowed at E3.

“As it has morphed, E3 has fundamentally become a console show,” he said. “We didn’t want to just squeeze out some time at a console show.”

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To unleash the wild creativity of the Internet on mobile phones, we have to open them up to the real Internet, says Mitchell Baker, the second speaker of the morning at the Web 2.0 Expo in San Francisco.

The chairman (er, chairwoman) of Mozilla says it shouldn’t matter what device you use to access the Web.

Mozilla is the nonprofit that makes the Firefox browser, which is being used by hundreds of millions of people as an alternative to Microsoft’s Internet Explorer.

She says that mobile browsers should all just work. The use cases do argue for different devices, but you will always want things quickly and with few keystrokes. “The information is the same,” she said. “We should be able to access it, mix it up, mash it up, save it, store it. All of those things should be the same if I am on a laptop or phone, at home or on a train.”

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We’re going to have a veritable galaxy of virtual worlds soon. Investors put $184 million into 23 virtual-world companies during the first quarter of 2008, according to Virtual Worlds Management. That may sound like a lot, but the froth in this sector is actually down from the past.

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