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As part of a three-year research, this study examines children’s collaborative play and literacy practices in virtual worlds within groups of early childhood and elementary age children in an afterschool setting in a small town in the Midwestern United States. This qualitative research uses ethnography methodology supported by Mediated Discourse Analysis (MDA). In order to organize the ethnographic data collection and identify the key moments/mediated actions to conduct detailed observations and analyses I employed the four MDA filters that excerpted and adapted from Wohlwend’s (2009a) larger four filter model. This study reveals the digital literacy practices of children in the Club Penguin virtual world and the role of commercialism on the children’s social interactions and literacy engagements.