Powerful graphics hardware is enabling strong improvements in both the appearance and the complexity of virtual worlds for games and simulations. However, current practices in the design and development of virtual worlds mostly resemble high-tech variants of traditional handcrafts, resulting in increasingly unbearable design costs. In this article we state that an essential key to overcoming these problems lies in the enrichment of object models with several kinds of semantic data. We discuss numerous and promising uses for semantic information in virtual worlds, and show, for many of them, how previous results of recent research can be successfully applied. We also identify the fundamental challenges in this new cross-disciplinary area, and point out a number of open issues lying ahead, including the need for (i) a suitable way of specifying semantic data, providing a powerful vocabulary that is useful and usable for all disciplines involved in game design and development; (ii) a seamless integration of semantic data integrated with procedural generation techniques, in order to provide designers with a new and powerful generation of tools; and (iii) a consistency maintenance among evolving objects in a changeable environment, for which powerful constraint-solving methods will be instrumental. We conclude that, as the expectancy for future games and simulations steadily shifts from improved graphics and appearance towards improved character behavior, plausible realism and coherent gameplay, embedding the game world and its objects with richer semantics is going to play a crucial role.We can therefore expect that, in the near future, increasing research efforts and influential results will be emerging in this new exciting area.