Here are some examples of what you can build with your Arduino toolkit and some imagination.
Start with Tom Igoe's Excellent "Physical Computing's Greatest Hits and Misses"
Some projects from Instructables.com:
DIY Magic Mirror - Arduino Powered - More DIY How To Projects
The CoaTracker - More DIY How To Projects
Arduino XMAS hitcounter - More DIY How To Projects
PressurePad input controller with blue LEDs indicating amount of pressure.
Hacked Easy Button that acts as a powerpoint slide controller
Passing Moment, SJMA 2007
Wishing Wall art installation, SJMA 2008
Slouch-aware chair
Exemplar - build your own game controller
Also: quicktime movie
Drawers: http://graphics.stanford.edu/~merrie/papers/drawers.pdf
The Pond
Bendable Alarm Clock