While kids play, they learn how to face challenges. They discover novel ways to manipulate their world, learn to deal with limited resources and challenge themselves to creative tasks. At the same time, they develop confidence, an understanding of basic engineering techniques and how to follow through on a plan.
Kids will also be tempted to take risks in the game and that is a good thing. Taking risks and meeting their challenges head-on is a great lesson that they can use as they grow. And in Minecraft, the only consequence of failure is having to start over.