ENTREPRENEURS HAVE ALWAYS tapped their social networks to get a jump start, trawling for customers after church or at the golf club. Digital social networks like Facebook and MySpace, of course, serve the same purpose. But a handful of start-ups are taking this ethos one step further—creating simple, often addictive games for which network users are willing to fork over real-life currency.

This nascent industry is sucking in staggering amounts of capital. Recently, in one 30-day span, Playfish, creator of Pet Society and nine other “social games,” sold for $400 million; Playdom, with its game Sorority Life, raised $43 million in financing; and sector leader Zynga raised $180 million. “I was there during the dot-com,” says Gareth Davis, head of Facebook’s game unit. “There was nothing like this.” Indeed, unlike their 1999 analogues, these firms have real sales and profits.

The business model is a capitalist fantasy come true. While development costs of a traditional video game can resemble movie budgets, a Playfish can produce a game for under $100,000—and complete it in weeks instead of years. Virtual games don’t have to fight for shelf space. Designers can release half-baked games online, collect feedback and only then devote resources to finish the game. As a game passes from friend to friend, it markets itself. If it’s a hit, revenue expands exponentially, but not costs. Two years ago, the Playfish guys shared the game How Big Is Your Brain? with 100 friends; three months later, it had 1.3 million users (at press time, more than 20 million).

More mind-bending is where the bulk of social-gaming revenue comes from: the sale of virtual goods, digital stuff that doesn’t actually exist. These games are free, but users have myriad opportunities to buy stuff: Playfish says it sells 60 million items a day, from $14 engagement rings to bacon sandwiches that cost a few cents. And those goodies make it easier for players to reach new levels and, generally, get more out of the game.

The popularity reflects a vaster audience than dudes who enjoy the solitude of strafing Nazis on 42-inch plasma. But after playing Pet Society, I decided the games aren’t for me. I was put off by the kiddy-room graphics and thought the game’s premise of dressing up pets to play with your friends’ pets, was, well, not my cup of tea. Then again, I might be tempted to play a word game, and Playfish and Zynga offer those, too.

In any case, the social-gaming world can get along fine without me. Playfish had an estimated $75 million in 2009 sales and could double that in 2010, analysts say. Still, I’m not sure which is more astonishing—the venture capital chasing this industry or that 20 percent of social gamers will spend real dollars for, say, birthday champagne for a digital piglet. What’s more: There’s little to prevent other entrepreneurs from launching their own games. “It’s why we have to work so hard,” says Vish Makhijani, Zynga’s COO.