It's not exactly "news", since the Microsoft LifeCam web-camera driver & software package was updated a few months ago, but I only picked up the latest version the other day and it brought a few smiles when playing with it today, during a call with James Akrigg.
The LifeCam software does real-time manipulation of the video coming from the camera, and should be visible in any application that uses the webcam (eg IM, Live Meeting etc). A few of the effects are potentially useful - like the one which blurs the background but keeps the face in focus, but most are just silly: some hilariously so.
What's kind-of amazing about the software is the facial tracking it can do; either to zoom in and out as you move around (and follow your head movements), or to attach effects to your face or the background, all in real time.
My favourite funny effect is the "big mouth" one :)
I can't for the life of me think of a business reason for using this, but it certainly raised a laugh ...