I ranted about it before, but Scott Jennings has a nice link to Clay Shirky's analysis of inflated Second Life user numbers and the media's reaction to them.
Second Life reports every character in the game as "resident", and then announces over a million of these "residents". Clay compares it to counting web site visits as "users". So if I used the same method that Second Life uses, I have over 350,000 "users". Which sounds like more than Ultima Online, Dark Age of Camelot, or Everquest 2. But in fact I have zero paying customers, and my peak concurrent users number barely hits the double digits on a good day. Second Life has less than 10,000 peak concurrent users, and less than 30,000 paying customers, which makes it one of the smaller online virtual worlds. But by inflating their numbers, and the media buying those numbers, they manage to look like one of the big ones, and get more media reporting than lets say Everquest 2.