From the Wikipedia article at http://en.wikipedia.org/wiki/Gold_farming
"A farmer is a general term for a person who acquires in-game currency in a MMORPG through collecting items and money that can be obtained by continually defeating enemies within the game. Farming is a popular method in which to obtain in-game currency within many MMORPGs. A gold farmer is a person who collects in-game currency for the purpose of selling it to other players for real world currency, such as the US dollar."
More than 100,000 young people in China are estimated to work as goldfarmers, see http://www.flickr.com/photos/lynetter/151086174/
From the New York Times at http://www.nytimes.com/2007/06/17/magazine/17lootfarmers-t.html?
"At the end of each shift, Li reports the night’s haul to his supervisor, and at the end of the week, he, like his nine co-workers, will be paid in full. For every 100 gold coins he gathers, Li makes 10 yuan, or about $1.25, earning an effective wage of 30 cents an hour, more or less. The boss, in turn, receives $3 or more when he sells those same coins to an online retailer, who will sell them to the final customer (an American or European player) for as much as $20. The small commercial space Li and his colleagues work in — two rooms, one for the workers and another for the supervisor — along with a rudimentary workers’ dorm, a half-hour’s bus ride away, are the entire physical plant of this modest $80,000-a-year business. It is estimated that there are thousands of businesses like it all over China, neither owned nor operated by the game companies from which they make their money. Collectively they employ an estimated 100,000 workers, who produce the bulk of all the goods in what has become a $1.8 billion worldwide trade in virtual items. The polite name for these operations is youxi gongzuoshi, or gaming workshops, but to gamers throughout the world, they are better known as gold farms. While the Internet has produced some strange new job descriptions over the years, it is hard to think of any more surreal than that of the Chinese gold farmer." (http://www.nytimes.com/2007/06/17/magazine/17lootfarmers-t.html?)
Gold Farming in the context of Immaterial Labour
From Paul Bowman on the Immaterial Labour Topica email list (July 2006):
"Gold Farming is where workers in china or other low-wage economies are paid to play MMORPGs (Massively Multiplayer Online Role Playing Games), like Everquest or World of Warcraft, to amass as much game gold as paossible which is then sold for "real" cash to players in the relatively higher waged west who can't be bothered investing the time in game playing to accumulate the virtual gold themselves.
Apart from the natural initial response that the customers in this new market need to "Get a life!", it is interesting from the perspective of immaterial labour analysis.
Our chinese workers in the gold farming sweatshop are definitely carrying out immaterial labour. They are not producing an immaterial product (in the pattern-form sense, e.g. texts, music, graphics, software, etc.) but nor are they engaged in immediate performant immaterial labour (such as labour of affect, e.g. call centre working, customer-facing work, liver entertainment or personal services e.g. hairdressing, teaching, prostitution, etc.). The labour they are doing remains within the framework of labour value (i.e. output is arithmetically related to labour time and is wholly alienated on exchange - this is not the case for immaterial product production as I've argued elsewhere), however it is alienable and accumulable in a way that immediately performant forms of immaterial labour are not.
On the consumer side what is happening? The consumer is benefiting from the wage differential - e.g. the US player of one of these games can purchase a month's worth of chinese game-playing labour time with several hours worth of their own wage-earning time. Here we start running into the problem of international labour value analysis which, AFAIK no-one has actually solved yet (please correct me if I'm wrong). More intringuingly, what is being purchased? A commodified affect? Does such a term exist?
Aside from the theoretical ramifications, WoW has 6 million (mainly US) paying players amongst whom there are mixed feelings about the effect of gold farming (see wikipedia on mudflation) on the "economy" of these virtual playverses they pay real money to spend time in. Accompanying this are accounts of racist attitudes against chinese players or any player exhibiting "bad" english. Immaterial labour, virtuality, imperialism and racism all in one very wierd package..."
Key Book to Read
Julian Dibbell's Play Money, a book about making real money in virtual worlds
- financial balance sheet of an East European gold farm, selling on WoW, which allows an insight into income, expenditure and profitability – as well as sales channels. 
(status: continuing devaluation of WoW gold has led to at least a temporary shut-down of the operation)