Phun is an educational, entertaining and somewhat (!) addictive piece of software for playing around in a 2D physics sandbox in a cartoony fashion. Phun is not just another game, but is intended to bring in interactive physics as an enabling technology for entirely new concepts and usage patterns in creative computing for animation, simulation, narrativity, engineering, art and education.
Originally developed for an MSc project by Emil Ernerfeldt at Umeå University, Sweden, Phun is now developed and marketed by Algoryx Simulation AB as Algodoo. Older versions of Phun are still available for personal and non-commercial use (click here for the Phun beta 5.28 download). The main difference between Phun and Algodoo appears to be the addition of lasers.
The video below shows how Algogoo can be used in class with smartboards and touch devices, but can also be used with keyboard and mouse: