Player generated content is like nuclear power: it can fuel anything you want for as long as you want, but produces some astonishingly nasty byproducts and occasionally an atomic bomb.
Actually, it's a lot like nuclear power, because those radioactive byproducts that are too hot to touch (usually porn) can also be used for fuel in their own way - via a breeder reactor. Har har. Har har har.
Like nuclear power, player generated content also has three steps. First, you have to get the right kind of material in the right density. Second, you need to set it off in a controlled fashion. Third, you have to have some method of harnessing the gentle glow that ensues.
As an example, Second Life is really great at harnessing the power of players, but it is really terrible at controlling the size of the reaction: they have a really hard time getting the right number of the right kinds of players together. They usually either have too few (not enough reaction mass) or too many (cascade griefing).
As another example, World of Warcraft is really great at getting the right number of players together, but the energy they throw off is only minimally useful because it has no path of expression. To stretch the metaphor, I guess you could say that instead of having a chain reaction, World of Warcraft warms itself on the simple radiation that the reaction mass produces.
I find that most people who think about player content have this idea that players will cluster into useful groups if left to their own devices. Sort of an "if you build it, they will come" philosophy. That's really not a very good way to build a nuclear reactor, is it? It's not even a very good way to build a nuclear bomb, which is what most of those people are trying to do (in a metaphorical sense, of course).
What kinds of methods can you think of for gathering a reaction mass of players, setting them off, and harnessing them as they burn? All without losing control, of course.
Hm, tough question.