The iPad/Arduino powered Kegmate at Yelp[1] is the result of a Hackathon, which are regularly scheduled. The most recent one was expanded to two days because we found that one day just wasn't enough. It's a lot of fun and many people work straight through to power through implementing their ideas. A lot of interesting, good things have come out of these events. You can work on
anything, you need to present it to all the other engineers at the end, and we encourage you to work with people from other teams that you might not normally get a chance to work with. For weeks before hand, people are coming up with ideas, drumming up support/finding other people who are interested in the same idea to work with, and judging effort to make sure they are working on something can be demoable at the end. I got a chance to get involved with doing some embedded development, which I'm interested in but don't normally get a chance to work on.
There's been a lot of fun things, and a lot of productive things. From Kegmate to a MUD that simulated the office environment to unexpected reporting tools that help out other departments.
[1] http://engineeringblog.yelp.com/2010/08/yelp-makes-beer-more... (previously posted on hacker news)