Kongregate, a Web site that bills itself as the YouTube of games since it allows users to create and upload video games, announced Thursday that it had received $5 million in funding from influential venture capital firm Greylock Partners.

The financing round may be small, but keep in mind that Greylock is also backing some of the Web’s hottest privately held social media companies, including Facebook, Digg and LinkedIn. In fact, LinkedIn co-founder Reid Hoffman was an angel investor in Kongregate.

Jim Greer, the CEO of Kongregate, said that the site, launched in March, currently has about 1400 games. Developers get a cut of advertising revenue generated from their games once they hit a certain page view threshold.

Greer said that so far, the site has averaged about 800,000 unique visitors per month (I earlier reported this figure as page views, apologies for the error) but that Kongregate hopes to attract more buzz in the coming months thanks to the funding announcement.

For the time being, Greer said that much of Kongregate’s traffic is coming from Digg, social discovery site StumbleUpon, which was recently bought by eBay (EBAY), and gaming community sites. He added that the company also saw a nice boost in traffic after Kongregate took advantage of the new open development platform on Facebook and launched a widget that lets Facebook users show high scores for Kongregate games.

And as traffic builds, he expects more game developers, looking to cash in on their work, to upload their games to the site.

“Eventually when we get to real scale, there could be serious money for the developers of the top games,” Greer said.

I’ve checked out some of the games - they are all in a Flash format - and many of them are pretty cool. I found The Fancy Parts Adventures, which has some rudimentary stick-figure animation, to be fairly addictive. So can Kongregate do to the video game business what Google (GOOG)’s YouTube has done to online video?

It’s certainly possible. Greer has connections to the established gaming companies, having worked for Pogo.com, the online game site owned by gaming software leader Electronic Arts (ERTS), before joining Kongregate. And Greer said that the likes of EA and Activision (ATVI) are keeping an eye on Kongregate to discover new ideas and talent.

“There is interest from large game publishers and independent game publishers. They are coming to the site to look for game developers,” he said.

But Kongregate is also planning to fund the development of games that will be exclusive to its site. In that sense, Kongregate is taking a page from the book of Sony (SNE), which re-branded its user-generated video site Grouper as Crackle last month and announced that it would invest in original videos for the site.

Still, Kongregate could wind up, like other gaming firms, as a target for one of the large game publishers or even a media company. After all, Greer pointed out that Disney (DIS) is interested in gaming, as evidenced by its recent purchase of virtual world for kids Club Penguin. And Viacom (VIAB) has also made several purchases in the gaming area, including Xfire, Quizilla and Harmonix.

Greer said that for now, he’s more interested in syndicating Kongregate games on other sites and added that the company was close to announcing a deal with a major game publisher that would sponsor contests on Kongregate. But Greer also indicated that he has fielded takeover offers for the firm.

So it probably won’t be a big surprise to see Kongregate ultimately follow the YouTube route and cash in on the media sector’s intense interest in user-generated content.