I'm actually disappointed that the Zune development team did not carry over this functionality from the Windows Media Player into Zune.
On WMP 11 and i guess also 10 You are able to load and synch lyrics. Try it out.
Left click on a song of your collection and select Advanced tag editor, select Lyrics tab, Add and paste your lyrics. Then click on Synchronized lyrics and adjust timing. Apply and ok
Then on the Play menu, select Lyrics, Captions and Subtitles and On if avail
They start showing in the now playing screen
Some chinese-made MP3 players already have this functionality to read the Meta data information.
They probably ran out of time to release some of the singing games for the holidays.
A Karaoke game must be on the works. Lips already plays your Zune music collection, but no lyrics support. crap.