Microsoft has announced at this years E3 Games conference a new peripheral/system coming next year for the XBox called 'Natal'. They've got some slick prototypes/ studio mockups which show people interacting with games and other applications in a very convincing manner. The technology is based on 3D camera technology which I've previously discussed, and it's good to see it coming to the fore. Microsoft certainly thinks it's a big deal, pulling out Spielberg and Peter Molyneux to talk up the future.
The promotional material implies that they've got some extra processing turning 3D camera bitmap images into models of the human body to be passed to the game itself. Perhaps this processing is the source of the lag between the person and the on-screen action in the video on this page, which I'm guessing is a real prototype. And too much lag and you end up with a cognitively tiring game. The system also boasts speech recognition — I'm skeptical on how effective that will be you're yelling at the screen. Overall, this new 3D system promises awesome new interaction possibilities, but given the huge hype, expect some post-natal depression if it doesn't meet expectations.
UPDATE: Natal now has a website.