SecondLife by Linden Labs is an often referenced example of the leading edge of immersive online worlds and an example of a game that remedies many of the shortcomings that lead to the failure of the Sims Online. The following in depth article on SecondLife answers most questions one could have about the premise, rules and economy of the game.
Certainly it also presents an exception to "Steiger's Law" -- in truth, the quality of experience improves as a function of the number of participants. Why is this?
At the most basic level we must differentiate between the centrally authored content of a system (in this case the Havok Physics Engine and the game environments and characters created by Linden). But by democratizing object and environment authoring to non-technical folks, Linden has taken a leap of faith (remember -- 99% of the world reads/consumes content created by 1%) and allowed anyone to populate the space.
Most online communities are democratic (or at least capitalistically democratic) with membership, but reserve the right to evolve the core system themselves. A notable exception is A Small World .