This chapter examines the early phases of entrance into virtual worlds as a "newbie" avatar within the framework of van Gennep and Turner's liminal phases of neophyte initiation rituals. This analysis of the avatar in liminal states examines how, even in seemingly anarchistic virtual worlds such as Second Life^TM, social norms and sanctions emerge to influence avatar identity formation and persistence. Observations on avatar identity development in liminal phases are drawn from the author's research studies of avatars becoming initiated into dragonhood conducted on the Isle of Wyrms in Second Life from 2007 to 2009. Theoretical underpinnings of the chapter are illustrated using case studies highlighting key liminal phases of avatar development.