The very first presentation at the festival was by Paul Marino and he defined Machinima as 'Machinima is filmmaking within a real-time, 3D virtual environment, often using 3D video-game technologies.'
So, a program like Moviestorm is included because you film in realtime. A program like Truespace would not be included because that is CGI that you render out after designing your set and camera movements.
Personally, I'm not that keen on that definition as it is too restrictive for making a movie, but I do see that Paul and the AMAS need to have some kind of definition. Later at the festival, there was a seminar with 4 top movie makers and the question was put to them. Hugh Hancocks first answer was 'I'm not touching that with a barge pole!' lol. He did try, though, and his explanation was good, IMO.
I managed to his answer on my digi-camera, and I put it on youtube. You'll have to suffer IL2 guys blethering first to get to it, hehe
click me or just flick through to time 7:10
Pesonally, I have mixed feelings about a definition. I currently favour the definition by Johnny Ingram who said 'it's just a tool for making movies'. There is something very simple and beautiful with that, though it ain't much good for defining who can and who can't enter for a machinima festival!