Basic Game
Horse can be played by any number of players. Decide on an order of play and then let the first shooter take his shot. He can shoot from anywhere on the court. If he misses, the next player gets the ball and can also shoot from anywhere. If he makes it, the next player must make the same shot. If that player misses, he earns the first letter (H) of "horse." If he makes it, the player after him must also make it. This goes on until someone misses and thus earns an "H."
The game continues in this way, with players in turn either making or missing shots. When they miss, they get the next letter in "horse." Once they have spelled all five letters, they are out of the game. The winner is the last one with letters left in the word (for instance, H-O-R-S, but no E).
Depending on the ages and abilities of the kids involved, you can allow a player who earns the last letter (E) to take a second shot at it. This can be a rule for everyone in the game, or only for smaller or less-skilled children.
Also depending on the kids, but just as much on the amount of time you want to spend playing, you can play other words instead of "horse," such as "pig" or "hippopotamus."
Learning Game
If you're a teacher or just a parent who wants his kids to learn as they play, you can provide vocabulary lists that must be spelled out instead of spelling "horse" repeatedly. One way is to give each player a different word of equal length to other words being spelled. So, for example, player 1 would be spelling "menu" while player 2 is spelling "four" and player 3 is spelling "dive."
If you have a large group of kids, or a wide range of ages, you can divide them by letter counts of the words you want them to spell, and separate them onto different courts. For example, one group plays until everyone except one player has spelled out different three-letter words, while another group spells out a collection of eight-letter words.
Reverse Horse
In this variation, you pick out five spots on the court--depending on age and skill level, everything from a 3-pointer to a layup. Each player in turn tries to make the shots to earn a letter. In other words, each player is trying to earn "horse," rather than get others to do so.
This can be played in several ways. For instance, you can take turns regardless of whether a player makes or misses a shot (player 1 makes a shot and earns "H," then player 2 shoots), or you can let any successful player continue until he misses (player 1 makes a shot, earns "H," and shoots again, until he misses).
Crazy Horse
If you've got kids who are a little advanced, you can give them more leeway by letting them shoot baskets as creatively as they can. For instance, by bouncing the ball off a wall before it goes into the bucket, by shooting two balls in succession, or by bouncing it off the rim, catching it and putting it into the basket. Anything goes, and the same rules apply: If one player makes whatever crazy shot he's come up with, the next player has to do the same.