What is gamification?
Gamification, in its strictest form, is applying game like mechanics to existing content. What this means is that you add things like points, levels, leaderboards, badges, etc. to your existing content to make it more interactive and improve user experience.
via Gamification Education
Economics teaches us the value of incentives. Animals respond well to rewards; they’re how I got my dog to obey commands, and how my friends get me to obey social norms. Gamification finds it’s way into education and training because traditional incentives of candy and letter-grades just don’t work well-enough. Google just released their education version of the Play store hosting thousands of apps which teach kids through the use of games. Remember, though, this isn’t gamification in it’s own right. Giving kids access to exclusive content after a certain score is achieved; posting scores to a leaderboard; awarding badges when activities are completed; those are all examples of gamification.
Moodle 2.5 supports this new trend via it’s badges functionality. You can design a badge (I use this site: http://icon-generator.net/) and set up criteria in Moodle to award the badge. Here are a few examples I’ve set up, keeping in mind that Moodle doesn’t yet support a number of activities badge award yet. Badges, once earned, can be stored in online backpacks. Moodle integrates natively with Mozilla Open Badges Backpack.