World models, or world simulators, are emerging as a significant advancement in AI, with Fei-Fei Li's World Labs raising $230 million to develop them. These models are designed to create internal representations of the world, allowing for better predictions and reasoning, which is essential for human-level intelligence. Despite current limitations, including high computational demands and biases in training data, successful development could revolutionize video generation, robotics, and decision-making in AI.