First, an infographic for the short answer:
Lastly, the longer answer - as Wikipedia defines it:
Gamification is the use of game thinking and game mechanics in non-game contexts to engage users in solving problemsand increase users' contributions. Gamification has been studied and applied in several domains, with some of the main purposes being to engage (improve user engagement, physical exercise, return on investment, flow, data quality,timeliness), teach (in classrooms, the public or at work), entertain (enjoyment, fan loyalty), measure (for recruiting and employee evaluation), and to improve the perceived ease of use of information systems. A review of research on gamification shows that a majority of studies on gamification find positive effects from gamification. However, individual and contextual differences exist.
Gamification uses an empathy-based approach (such as Design thinking) for introducing, transforming and operating a service system that allows players to enter a gameful experience to support value creation for the players and other stakeholders.Gamification designers address the user as player to indicate that the motivations and interests of the player are in the center of the gamification design.
Gamification in a narrow sense is used in a non-game context, is built into the service system, and is aiming at an infiniteexperience. It does not aim at creating a game but offering a gameful experience. In a broader sense gamification also includes game context such as in serious games and finite and infinite games.
Gamification techniques strive to leverage people's natural desires for socializing, learning, mastery, competition, achievement, status, self-expression, altruism, or closure. Early gamification strategies use rewards for players who accomplish desired tasks or competition to engage players. Types of rewards include points, achievement badges or levels, the filling of a progress bar, or providing the user with virtual currency. Making the rewards for accomplishing tasks visible to other players or providing leader boards are ways of encouraging players to compete. Due to potentially problematic consequences of competition, which can result in unethical behavior, low cooperation and low collaboration, or disadvantaging certain player demographics such as women, current gamification designs try to refrain from using this element.
Another approach to gamification is to make existing tasks feel more like games. Some techniques used in this approach include adding meaningful choice, onboarding with a tutorial, increasing challenge, and adding narrative.
Gamification has been widely applied in marketing. Over 70% of Forbes Global 2000 companies surveyed in 2013 said they planned to use gamification for the purposes of marketing and customer retention. For example, in November 2011 Australian broadcast and online media partnership Yahoo!7 launched its Fango mobile app/SAP, which TV viewers use to interact with shows via techniques like check-ins and badges. As of February 2012, the app had been downloaded more than 200,000 times since its launch. Gamification has also been used in customer loyalty programmes. In 2010, Starbucks gave custom Foursquare badges to people who checked in at multiple locations and offered discounts to people who checked in most frequently at an individual store. There have also been proposals to use gamification for competitive intelligence,encouraging people to fill out surveys, and to do market research on brand recognition. Gamification has also been integrated into Help Desk software. In 2012, Freshdesk, a SaaS-based customer support product, integrated gamification features, allowing agents to earn badges based on performance.
Gamification has also been used as a tool for customer engagement, and for encouraging desirable website usage behavior. Additionally, gamification is readily applicable to increasing engagement on sites built on social network services. For example, in August 2010, one site, DevHub, announced that they have increased the number of users who completed their online tasks from 10% to 80% after adding gamification elements. On the programming question-and-answer site Stack Overflow users receive points and/or badges for performing a variety of actions, including spreading links to questions and answers via Facebook and Twitter. A large number of different badges are available, and when a user's reputation pointsexceed various thresholds, he or she gains additional privileges, including at the higher end, the privilege of helping to moderate the site.
Gamification can be used for ideation, the structured brainstorming to produce new ideas. A study at MIT Sloan found that ideation games helped participants generate more and better ideas, and compared it to gauging the influence of academic papers by the numbers of citations received in subsequent research.
Gamification by Kevin Werbach, University of Pennsylvania withCoursera, online course preview
Education and training are areas where there has been interest in gamification. Microsoftreleased the game Ribbon Hero 2 as an add-on to their Office productivity suite to help train people to use it effectively, which was described by Microsoft as one of the most popular projects its Office Labs division ever released. The New York City Department of Educationwith funding from the MacArthur Foundation and the Bill and Melinda Gates Foundation has set up a school called Quest to Learn centred around game-based learning, with the intent to make education more engaging and relevant to modern kids. SAP has used games to educate their employees on sustainability. The US military and Unilever have also used gamification in their training. The Khan Academy is an example of the use of gamification techniques in online education. In August 2009, Gbanga launched the educational location-based game Gbanga Zooh for Zurich Zoo that asked participants to actively save endangered animals and physically bring them back to a zoo. Players maintained virtual habitats across the Canton of Zurich to attract and collect endangered species of animals. In 2014, the True Life Game project was initiated, with the main purpose of researching the best ways to apply concepts of gamification and crowdsourcing into lifelong learning.
Applications like Fitocracy and QUENTIQ use gamification to encourage their users to exercise more effectively and improve their overall health. Users are awarded varying numbers of points for activities they perform in their workouts and gain levels based on points collected. Users can also complete quests (sets of related activities) and gain achievement badges for fitness milestones. Health Month adds aspects of social gaming by allowing successful users to restore points to users who have failed to meet certain goals.
Employee productivity is another problem that gamification has been used to tackle. RedCritter Tracker, Playcall, and Arcaris  are examples of management tools that use gamification to improve productivity. Digital Brand Group is the first company in India to fully gamify their work process to make their work style more engaging and encouraging.
Crowdsourcing has been gamified in games like Foldit, a game designed by the University of Washington, in which players compete to manipulate proteins into more efficient structures. A 2010 paper in science journal Nature credited Foldit's 57,000 players with providing useful results that matched or outperformed algorithmically computed solutions. The ESP Game is a game that is used to generate image metadata. Google Image Labeler is a version of the ESP Game that Google has licensed to generate its own image metadata. Research from the University of Bonn used gamification to increase wiki contributions by 62%.
Alix Levine, an American security consultant, described gamification as some techniques that a number of extremist websites such as Stormfront and various terrorism-related sites used to build loyalty and participation. As an example, Levine mentioned reputation scores. The Anti-Defamation League has noted that some terror groups, such as Hezbollah, have created actual games to market their ideology to adolescents.
Microsoft has also announced plans to use gamification techniques for its Windows Phone 7 operating system design.While businesses face the challenges of creating motivating gameplay strategies, what makes for effective gamification  is a key question?
Gamification has also been applied to authentication. For example, the possibilities of using a game like Guitar Hero can help someone learn a password implicitly. Furthermore, games have been explored as a way to learn new and complicated passwords. It is suggested that these games could be used to "level up" a password, thereby improving its strength over time. Gamification has also been proposed as a way to select and manage archives. Recently, an Australian technology company called Wynbox has recorded success in the application of its gamification engine to the hotel booking process.
Though the term "gamification" was coined in 2002 by Nick Pelling, a British-born computer programmer and inventor, it did not gain popularity until 2010. Even prior to the term coming into use, other fields borrowing elements from videogameswas common; for example, some work in learning disabilities and scientific visualization adapted elements from videogames. A Forbes blogger also retroactively labelled Charles Coonradt, who in 1973 founded the consultancy The Game of Work and in 1984 wrote a book by the same name, as the "Grandfather of Gamification".
The term "gamification" first gained widespread usage in 2010, in a more specific sense referring to incorporation of social/reward aspects of games into software. The technique captured the attention of venture capitalists, one of whom said he considered gamification the most promising area in gaming. Another observed that half of all companies seeking funding for consumer software applications mentioned game design in their presentations.
Several researchers consider gamification closely related to earlier work on adapting game-design elements and techniques to non-game contexts. Deterding et al. survey research in human–computer interaction that uses game-derived elements for motivation and interface design, and Nelson argues for a connection to both the Soviet concept of socialist competition, and the American management trend of "fun at work". Fuchs points out that gamification might be driven by new forms of ludic interfaces. Gamification conferences have also retroactively incorporated simulation; e.g. Will Wright, designer of the 1989video game SimCity, was the keynote speaker at the gamification conference Gsummit 2013.
In addition to companies that use the technique, a number of businesses created gamification platforms. In October 2007,Bunchball, backed by Adobe Systems Incorporated, was the first company to provide game mechanics as a service,on Dunder Mifflin Infinity, the community site for the NBC TV show The Office. Bunchball customers have included Playboy, Chiquita, Bravo, and The USA Network. In June 2009 a Seattle-based startup called BigDoor was founded, providing gamification technology to non-gaming websites. Badgeville launched in late 2010, and raised $15 million in venture-capital funding in its first year of operation; it provides gamification services to a number of large customers.InsideSales.com provides a gamification solution targeted to sales representatives using the Charles Coonradt principlesthat are integrated into Salesforce.com platform. IActionable also launched a gamification platform aimed at integrating withSalesforce.com.
The inaugural Loyalty Games 2014 Loyalty Gamification World Championship will be held Online with Live World Finals San Francisco.