There’s a nice video demo up of the BumpTop 3D Desktop from the University of Toronto’s Dynamic Graphics Lab. Here’s the abstract from their paper (presented at CHI this year):
We explore making virtual desktops behave in a more physically realistic manner by adding physics simulation and using piling instead of filing as the fundamental organizational structure. Objects can be casually dragged and tossed around, influenced by physical characteristics such as friction and mass, much like we would manipulate lightweight objects in the real world. We present a prototype, called BumpTop, that coherently integrates a variety of interaction and visualization techniques optimized for pen input we have developed to support this new style of desktop organization.
I don’t know about this being a full desktop replacement, but for some kinds of applications I could see it working quite well. For example, I’d love it for sorting through tens to hundreds of images or other visual media, especially if they added two-handed or multi-handed interaction to it.