Anastasia from YPulse just posted some interesting thoughts on what different age groups want out of their avatars:

"1) For younger children and tweens, identity is encoded mainly (although not exclusively!) through physical appearance.

2) In contrast, for adults identity seem to be encoded mostly through symbolic action, e.g.,text, speech, status, money.

3) For teenagers however (and possibly young adults), both physical and symbolic ways of articulating identity are relevant. "

It seems pretty clear that a successful avatar application needs to focus on two fronts: customization and interaction.   How does it look and what does it do?  We've been discussing both of these topics around the office lately.   Understanding the nature of how someone wants to represent themselves is key.  What's more important visually?  The character itself or the accessories (clothing, props, etc..)? 

Also key is the application.  End users are expecting more out of all types of media, including virtual characters.  "What does it do?" is something we're trying to come up with creative answers to all the time.  Can it tell a story?  Sing karaoke?  Be part of a game?   To capture the spectrum of age groups and user types, our challenge is to make sure we push ourselves in both areas.