The synthetic insect project is basically smart dust with legs. We're shooting for millimeter scale legged locotion, or possibly flying. We're working with people in biology who study insect walking, running, and flight (they've got little force platforms and virtual reality setups for bugs - very cool). In my vision of the project, in a few years you'll be able to use a web-based cut-and-paste design tool to select legs, motors, sensors, and electronics to design your own custom insects, download control algorithms to them, and turn them loose in a 3D interactive simulation to socialize or do battle with other virtual bugs. Once you get the design you like, you press the button, it gets submitted for fabrication, and two months later you've got the actual device (more likely hundreds of them) running around on your desk.
Prof. Ron Fearing is leading another synthetic insect project in which we're trying to make a micro flying insect.
Somewhere in between smart dust and synthetic insects is the micro rocket project, where we're trying to integrate solid fuel rockets into silicon chips.
Providing simulation support for as much of the above work as possible is the SUGAR project, to do fast, accurate CAD for MEMS.