Child's toy computer is how Martin declared the XO-1 in the customs form when sending it here. It does include a smattering of educational software:

• TurtleArt is a graphical Logo implementation: You get to paint by programming a little pen-wielding turtle to wander over the screen. The programming is done by dragging instruction blocks (such as move forward, turn, arc, raise the pen, change the pen colour) from the tool box onto the screen. This is great fun, I can see myself not finishing this post on Friday because I cannot stop playing TurtleArt right now.
• Etoys is a Squeak Smalltalk media-rich authoring environment with a simple, powerful scripted object model for many kinds of objects. I have played with Squeak before, which is a platform is equally interesting and esoteric. The XO-1 version is completely compatible with everything out there in Squeakland.
• Pippy is an interactive Python interpreter that aims to teach programming in the language most of the higher-level programs on the laptop are written.
• Measure is for the physics lab and provides an interface to display and record signals produced by external sensors as waveforms, like an oscilloscope. You would need to build those sensors and connect them to the audio input port, so that I could not really test this activity.
• TamTam is a suite of music composition programs. TamTam Mini is a simple activity where you can select an instrument and use the keyboard to play notes. TamTam Edit is a five-track editor that can be used to arrange and record whole songs. Young Man's GarageBand. TamTam Jam seems to be somewhere in between Mini and Edit. TamTam SynthLab is an advanced synthesiser application that I think is used to create new instruments for TamTam Edit.

In addition to using these activities in creative ways, the child is also encouraged to modify the software itself. A good part of it is being written in Python and other dynamic languages, and thus lends itself to live hacking. There is even supposed to be a View Source button to reveal the underlying codebase of the running activity and allow changes to it, but that seems to be not implemented yet. As programming skills grow, one could even tackle the base system itself, all of which is Open Source (Linux and OpenFirmware), although that kind of development can probably not be done on the XO itself.

As for games, there is Memorize, the game of matching pairs, with an editor to create your own set of tiles, others are available for download, and Electronic Arts has donated SimCity.