In this paper I deploy a synthesis of methods I term virtual literacy ethnography to investigate the diverse literacy practices of the project Schome Park. Participants have been engaging over a 15-month period in an innovative out-of-school project centred on use of the (Teen) Second Life three-dimensional virtual world. Some ethical aspects of working with children in virtual worlds are briefly discussed. I analyse evidence from the three main communicative domains of the project: chat logs, wiki and forum, demonstrating the complexity and creativity of student literacy practices. I include in my data selection exemplars that draw on persistently valued literacy texts and demonstrate that attentive examination to literacy practices may be more fruitful than maintaining overly dichotomised boundaries between new literacies and those more established.