According to an Innovative interview with education author Scott Howell, traditional paper and Pencil tests are holding online students back:

"Beyond the age-old challenge of aligning our instruction with our testing, we now have the years-old challenge of aligning the way we deliver instruction with the way we assess it, given our rich, robust multimedia environment. Instructors and designers must seek new ways to integrate appropriate methods of testing in such an environment, ensuring that innovative course design remains tied in with consistently clear, focused assessment of student learning."

Howell claims that adding multimedia elements to exams (while not getting carried away with unnecessary features) will help online students prove their knowledge in the same way that they learn.

This seems like a smart idea. However, I'd hope that online instructors would use caution when creating multimedia exams. Too many multimedia elements can distract or confuse students. Sometimes the simplest way really is the best way.