Lets pretty cool, would like to see it used for virtual worlds not just games.

Virtual worlds need this kind of natural interface if they're going to be accepted in the mainstream, IMHO (see how the Wii's controller led to adoption by non-traditional gamers?). I'm pretty sure Microsoft will license this to Windows software developers as well, extending its use beyond the Xbox and into non-gaming applications.

Don't count on it arriving before 2010, though. The only just released the specs to game developers who will need to create games to take full advantage of it.

http://www.youtube.com/watch?v=g_txF7iETX0

Check out this Youtube video on Project Natal.  The soccer and skateboarding is so cool.. but then again so is the facial recognition.. and the controller free entertainment.  I wish this was coming out sooner.