Jam With Chrome is a fun new Google web tool. On Jam With Chrome (only works if you use the Chrome browser) you can play nineteen virtual instruments. Jams can have four musicians playing together in real-time over the web. It's an application that I had a bit of fun playing with this evening. Unfortunately, there doesn't appear to be a native recording application built into Jam With Chrome. You could use a screencasting tool like Jing or Screenr to record your jam session.
Applications for Education
Jam With Chrome could be a fun app for students to use to practice improvising jams in a music appreciation course.