Comment 8 for bug 301190

P.S.
Those of you reading this page looking for a quick fix and who are inexperienced with the command line;
in Ubuntu / Gnome... 'Terminal' is found in 'Applications' > 'Accessories'
you must precede the command with 'sudo' as follows:

  sudo sed -i -e "s/-xshm//" /usr/games/etoys

Then type your password to complete the process.

You will not see anything happen after pressing the return/enter key and you will be returned to your command prompt if you typed or copy and pasted the command correctly.
Just close the Terminal window and launch the eToys program: Applications > Education > eToys

enjoy!