We are quite close in creating the first “protocell”. Protocell refers to an artificially synthesized cell which has bare minimums. The basic motivation behind creating artificial living systems is that the people who are doing this believe that what we can’t create, we don’t understand. Hence, several teams world over are racing to create an artificial cell when can teach us a hell lot of biology.
Check out the relevant article in the latest issue of The Scientist at: http://www.the-scientist.com/2006/1/1/30/1/