What’s in badge? Many Foursquare users have been wondering whether or not acquiring all of those colorful circles would ever translate into something tangible, and Foursquare co-founder Dennis Crowley arrived at the Mashable Media Summit Tuesday armed with an answer.

To combat what Crowley described as “badge fatigue,” Foursquare will begin working with venue and event partners to offer special access, free stuff and other goodies to Foursquare users who unlock sponsored badges.

Crowley applied the new feature at Internet Week in New York, where users who check in at specified venues will unlock a badge that, when shown to bouncers or venue employee at certain Internet Week events, will grant the holder priority access to the event.

The badge rewards announcement comes quickly on the heels of geolocation competitor Loopt’s unveiling of Loopt Star, a virtual rewards program that allows business to offer loyalty benefits to any customers (as opposed to just a “mayor”).

Expanding the benefit of participating in a platform like Foursquare is extremely important, as the novelty of “checking in” over and over with no physical reward will eventually wear off. Additionally, as Foursquare passes the 1.6 million user mark, it’s become harder and harder to earn mayorships at popular venues. Rewarding only the mayor isn’t enough when the race to become the mayor is so crowded.

Being able to earn free stuff or expanded access by flashing a proprietary badge opens the door for Foursquare to be one of the first social platforms to provide users with useful, easily qualified and easily attained real-life value. Instead of paper punch cards or plastic swipe cards than can be lost or forgotten, customers can easily track their patronage and earn rewards through their ever-present cell phones. This finally makes Foursquare badges enticing in more ways than just as shiny digital reminders of a good night out.

Earlier today a group of Foursquare employees gathered outside the Austin Convention Center to start an impromptu game of real foursquare. I tried my best to become “king”, but I quickly realized I’m not as talented as I was in fourth grade. I was able to talk to Foursquare co-founder Dennis Crowley while he was on a break from playing. Watch the video where we discuss the 1 year Foursquare birthday celebration, his badge/check-in status, and his favorite social media tools.