This has come up a number of times recently, so I thought I'd give you some tips on how you can see what students are doing in your course. This is especially useful when a student claims they weren't able to login or had other technical issues.
1. Click on your Participants link (usually in the upper left). Here you'll see a complete list of students, as well as the last time the student logged into your course.
2. Click on a student's name.
3. If you have instructor access to the course -- students will not be able to see this -- you will have an "Activity Reports" tab at the top. Select this.
4. As a default, usually the "Outline report" is displayed, which shows you the number of times they clicked on various items in their course, as well as the last time they looked at each particular item.
5. If you click on "Complete report," you will see every item, whether they've looked at it or not.
6. Perhaps the most useful, though, is the "All logs" link, which gives you a list of everything your student has done in the course, including the time it was done.
As a side note, you will most likely find that there is a distinct correlation between the amount of time a student spends in a course and their grade. Imagine that. :)
Any questions, let me know.