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Word study is the alternative to teaching spelling the traditional way (memorization, memorization, memorization). It involves looking for patterns and incorporating phonics. Here's a great site that explains it a little more:
http://www.readingrockets.org/article/80
Here are some fun sites with word study games:
http://www.eastoftheweb.com/games/
http://www.shockwave.com/online/word-games.jsp
http://blackdog4kids.com/games/word/