The Council of Stellar Management (CSM) in EVE Online is perhaps the best implementation of governance in the virtual space achieved thus far among the numerous MMOs and virtual worlds, although this concept in the industry is rare. The basic idea behind the CSM is that as the horizons of EVE Online and its subscriber numbers expand, there are many different playstyles to be found in the game. The CSM acts as the voice of the playerbase, advising CCP Games on how best to change or develop the game to suit player interests in a far more direct way than the requisite 'nerf this' or 'boost that' threads on the official forums. The Council of Stellar Management delegates aren't selected by CCP but are elected by the players themselves, which is the subject of the latest dev blog from CCP Xhagen (aka Pétur Jóhannes Óskarsson).
EVE Online's 3rd Council of Stellar Management elections are underway. CCP Xhagen's dev blog enumerates some of the CSM's main achievements to date, hopefully providing more incentive for players to vote. (Voter turnout has been lower than hoped, with only 8.6% of the playerbase getting involved, as of the 2nd election.) Massively has covered this idea of player governance in the past through interviews with CCP developers involved with this initiative, but Xhagen's dev blog and its links to EVElopedia provides greater detail into how the CSM operates.
The polls close on May 26th, so if you're an EVE Online player, remember to make your vote count.