Atmosphir is, basically, a 3D platform game engine. Everything is taken care of by the program, apart from the level design. Objects are provided, and change depending on the level theme chosen. The user uses these to build a stage, in which they can also place goals, check points, items, etc.
The level design tools are actually quite neat, and it's really easy to build, and test, levels. The example video on their website also demonstrates action-RPG like abilities, and Super Mario Galaxy-like planetoids. Players create a character (for free) which acts as their avatar when playing Atmosphir made games.
An update: Atmosphir seems to have shut down, those there has been an effort to preserve some things (including a functional program): http://onemoreblock.com/forum/threads/download-atmosphir.274/