1. A method of dynamically partitioning a hierarchical space of objects representing a dynamic set of participants in a distributed interactive application for managing state updates of said objects, said method comprising: partitioning an application space at any point of time into communication cells according to a current state of said application space, the application space comprising an N-dimensional virtual attribute space containing a set of objects and its associated states, and each of the set of objects comprising a set of attributes and a set of methods for modifying the set of attributes, wherein N≧3, wherein said application space is spanned by coordinates representing said attribute values, wherein said application space is partially replicated in each of a plurality of clients, each of which controls a limited number of static and dynamic objects in the application space; grouping the plurality of clients into the communication cells; indexing the communication cells based on the set of attributes of objects sharing a communication interest at that time; constructing a hierarchical index by sequential insertion of the communication cells; and disseminating state updates to subsets of clients according to their communication interests, wherein a state update is generated for each modification of the attributes.