Can Microsoft add a motion controller to the Xbox? They seem to think that they can. And they are, in camera form.

“For far too many people, the controller is a barrier preventing people from enjoying the game,” said Don Mattrick from Microsoft. “Can we make you the controller: Yes we can.”

A trailer then popped up, showing us various gameplay modes that featured no controller at all. A kid was playing a kung-fu game by acting out in front of the TV. A family was playing a racing game together, moving their limbs and bodies to interact with the game.

The camera, Project Natal, will feature “Full motion body capture” according to Don Mattrick, as well as being able to scan your own items, like skateboards, and put them into the game. There’s also facial and voice recognition.

“When it launches, it will work with every Xbox 360 sold, and ever Xbox 360 we will sell in the future, including future Xbox models.”

According to Kudo Tsunoda, the creative director of Project Natal, the camera will recognise player’s faces and sign them into Xbox Live. Natal will also allow your movements to be mimicked by your own Avatar.

Tsunoda promises that, “This is a full-body experience, not something you can just do on the couch by waggling your hand!”

New games and features exclusive for Project Natal is Ricochet, a 3D, full-body version of Breakout. A young girl on stage smacks balls into a wall of blocks, destroying them. Another feature, Paint Party, allows a player to fling paint against a virtual canvas. Speaking the name of a colour brings a bucket of said colour into the Avatar’s hand. Blue, green, brown and light brown are all summoned by a simple voice command.

Next, Peter Molyneux walks out on stage! He agrees with the principle behind Natal. The controller is the biggest barrier, and Project Natal is going to change how we game. Lionhead have been playing around with Project Natal for a few months, creating a character named Milo.

Milo can recognise your face, as well as recognising the tone of someone’s voice. He’s a fully interactive virtual human. A player, Claire, interacts with Milo, connecting with him and acting out various scenarios with him. A hand up to the TV swishes water around in a pond. Every hand movement is being recognised.

Claire draws a picture for Milo and holds it up to the Natal camera. It is instantly recognised and appears in Milo’s hand. Molyneux believes this is a real character, someone who knows you personally.

“This is a landmark in computer entertainment.”

If this works, nothing is going to stop Microsoft.