According to the press release, the game is poised to "provide a child-safe alternative to other MMOGs on the market. As a player, you'll be able to customize your mini-figs and interact in the universe as any character you choose, providing unique opportunities for players to expand and explore with their creations."
We get the impression that there won't be an option to freely build with LEGO bricks in the world, given the possible NSFW imagery that one could (and undoubtedly would) create. The world of LEGOs has proved to be profitable in the games industry with LEGO Star Wars; also due in 2008 is LEGO Batman.
[updated to reflect newest information.]