Well, to be fair, making video games isn't what it's for. People have made games like this before- although the most compelling example I've seen used SVG, not XHTML. This one's a little buggy, mostly in the wall handling. Sometimes, the ball hits the wall and stops. Something about the current horizontal motion vector- or so I think.
But essentially, the game is masturbatory pong- you control both paddles with your mouse. All of the game sprites are implemented as absolutely positioned DIVs that contain images. While this application doesn't use it, it's possible to animate the sprites, as well as have multiple frame sets- collections of frames that are grouped. This means I can have on set of frames for a character walking to the left, the right, etc.