http://www.crayonphysics.com/

Crayon Physics is a 2D physics puzzle / sandbox game, in which you get to experience what it would be like if your drawings would be magically transformed into real physical objects. Solve puzzles with your artistic vision and creative use of physics.

It's a true gem of a game:  great sounds, level design, and music, coupled with a simple yet powerful concept.  While this is a commercial game, you can download the demo for free.




See Also:  Microsoft Physics Illustrator

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Magic Pen

http://magic.pen.fizzlebot.com/

lejandro Guillen created a clone of Crayon Physics as a flash based game called Magic Pen.  It's smaller but free, and requires no install.  Just click the link above to play it!