Zen of Design has a great post up about how MMO game mechanics should "incentivize fun" in the gameplay. The main example Damion uses is the "daily quests" recently introduced to World of Warcraft-- Blizzard originally gave all players a goal of 5000g for their epic mounts, but then realized that they hadn't given players enough ways to earn that money-- most people were left grinding random spots to make the cash. So they then created "daily quests"-- daily timer quests that were repetitive and easy that gave lots of money. Play the game for x number of minutes every day, get all the cash you need.
But as Damion says, the daily quests serve a purpose, but they aren't actually fun. Lots of players see them as a job, and the fact that they are repetitive (in a bad way-- he says a game like Civilization actually makes repeating gameplay interesting) makes them a necessity rather than an incentive to play the game.
Now, the good news is that in the latest patch, Blizzard is working to fix this-- they've introduced daily quests that ask players to play fundamental parts of the game, and so there are now crafting daily quests, as well as battleground and instance quests. But these are fixes after the fact-- the way to really incentivize fun is to watch what players themselves want to do during development, and then reward that. Halo isn't an MMO, technically, but Bungie noticed that players were dying strange deaths in game, and then actually changed the game to reward players for their activities. Same deal with MMOs-- find out what players want to do in your game, and then give them rewards for doing just that.