Microsoft demonstrated a technology, code-named Project Natal, that enables players to control games using only body movements and voice commands, no controller required — the gamer’s body becomes the controller. Project Natal uses several cameras, plus a highly specialized microphone and a lot of fancy software, to track the gamer’s body and interpret his or her voice.The technology behind Natal is fairly simple, a TV-mounted camera/microphone bar to sense motion, sound and movement. What's new and ground breaking is the tracking of 3D movement as well as 2D movement. The system is also able to scan users faces and sign them into Xbox live, as well as react to vocal tone and pitch, and process this data in real-time. The key to the system is accuracy and during one of the demos the presenter managed to move an avatar in a rather bizarre and un-human like fashion.
Pricing for Project Natal has not been announced. Project Natal will reportedly also serve as the basis for a "new" Xbox 360. Though it is rumored that the launch of Project Natal will be accompanied with the release of a new Xbox 360 console (as either a new retail configuration, a significant design revision, and/or a modest hardware upgrade), Microsoft has dismissed the reports in public, and has repeatedly emphasized that Project Natal will be fully compatible with all Xbox 360 consoles. More Information Here