UPDATE 4/24/11: Phun is commercially available and now optimized for use on the newer multi-touch, multi-user SMARTboards. It is now known as Algodoo.
From the creators of Phun:
"Phun is an educational, entertaining and somewhat (!) addictive piece of software for designing and exploring 2D multi-physics simulations in a cartoony fashion. It is part of our long term mission to bring visual physics based simulation to the masses. The application is developed for Umevatoriet, Umeås new science center, where it will run on a large interactive display, but you can also download it and run it on your own pc."
This is a partial cross-post. Additional information and links to downloads and the music in the video can be found in a post on the Interactive Multimedia Technology blog.