Just letting you know I have put up the source code for a programming library implementing the new FastLSM soft body physics algorithm, which was developed by myself and Professor Doug James at Cornell University and which was presented at SIGGRAPH 2007.
The FastLSM algorithm allows for simulating fracturing soft bodies at much faster speeds than previous methods (in one demo, we show 150 soft penguins deforming in real time), and is also quite easy to implement. The project page has the SIGGRAPH paper, a streaming video, 2D and 3D demos, and source code.
The main application to games of this algorithm is that it allows fracturing, destructible objects. For an example of this, please check out my previous project, the RealMatter engine, based on the same algorithm (warning: the video, which shows a zombie ragdoll being attacked, is fairly gory).Now that the algorithm is provided free for non-commercial use in a programming library, I would love for people try to see what they can do with it. I believe that this algorithm could enable fully destructible environments, far superior ragdoll simulations (such as the zombie in the RealMatter demo), and more realistic damage models for vehicles.
The algorithm's approach is geometrically based (like Mueller's 2005 Meshless Deformations paper), and therefore is unconditionally stable and supports arbitrarily rigid objects cheaply. Thus it bypasses most of the shortcomings of mass-spring systems. The dynamics of the engine result in convincing rubber-like simulations. To get a feel for the range of the engine and how the material will generally feel, try out the 2D demo, which allows for tweaking all the parameters of the simulation (.NET framework required for this demo).
I am currently looking for contacts in companies such as Havok and AGEIA that may be interested in acquiring the rights to / commercializing this algorithm. Please feel free to forward this link. Also, I'd be very interested if any experienced game developer would like to collaborate on putting together a small game to showcase the potential of this engine.
Best,
Alec

(Solid and shell buddha models deforming using FastLSM algorithm)

(150 soft body penguins deforming in real time)