It also does the same thing for videos, to YouTube.
Taking advantage of that, I snapped a dozen pictures of Gabe (mercy_rain's son) and SJ Klein (OLPC Manager of Content) with the OLPC. Note that Gabe had never seen one of these things before, and with practically no help from the adults, he had started painting, typing, and playing with the webcam, cackling quite evilly the whole time.
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Photos are from 11 Aug 2007.