Oh this is exciting, but I don't play each and every MMO (that would be insane) so didn't know about it.
Cheng, W. (2012). Role-Playing toward a Virtual Musical Democracy in The Lord of the Rings Online. Ethnomusicology, 56(1), 31-62.
There's no abstract, but here's an early paragraph:
In an attempt to honor the rich musical lore of Tolkien’s Middle-earth, Turbine implemented in LOTRO one of the most elaborate player-music systems in any MMORPG to date. This system allows a player to perform both live and pre-recorded tunes that can be heard by other nearby players in the gameworld. A player’s musical performance is visually simulated by avataric motions and strings of colorful notes that float out of a character’s equipped instrument (see Figure 2). Examples of such instruments—each of which sports a different synthesized timbre and a range of three chromatic octaves along the Western twelve-tone scale—include the bagpipes, clarinet, flute, horn, cowbell, drums, harp, lute, and theorbo.The wiki page seems pretty informative, and there's a website repository for the ABC music notation files.
I love it when people make things and share things, and music is community-based, a form of communication, and is very old! The oldest instrument we've found, a bone flute, is about 40,000 years old and it certainly wasn't the first musical instrument, since flutes aren't that easy to make.