Xbox 360 targets the Wii with "Project Natal" motion-control system

Get ready to drop-kick bad guys, steer race cars around hairpin turns, swipe through the Xbox Live interface, and even chat and interact with game characters, all without a controller. Also coming soon: Facebook and Twitter on the 360, along with on-demand, 1080p movies and TV shows.

The announcements came today during an absolutely packed Microsoft keynote at E3 today, where we also saw trailers for the latest Halo epic, got a progress report on Final Fantasy XIII, and learned that Metal Gear Solid will be coming to the 360. (I wasn't in Los Angeles for the actual event, unfortunately; instead, I watched a live feed in my Brooklyn den.)

First up: The widely rumored motion-control announcement, which Microsoft execs looked genuinely excited about, even crowing that "you don't just sit on the sofa using pre-set waggle commands" with the new system—a thinly-veiled swipe at the Wii that drew guffaws from E3 festival-goers.

Code-named "Project Natal"—and no, we didn't get any release or pricing details—the system uses a camera module that sits near your TV and tracks your hand movements, facial expressions, and even full-body gestures, all in real time.

In a series of jaw-dropping demos, we saw players kickboxing with game characters, steering with an imaginary racing wheel, skateboarding on an invisible skateboard, splashing buckets of paint onto a blank canvas, and swiping thought the "Xbox Experience" menu panels.

Even more impressive, Microsoft execs showed off Natal's facial and voice recognition capabilities, which let you call out answers to trivia games, try on virtual outfits with your online pals, dip your hands in a digital pond and see your reflection in the ripples, and even chat with game characters who'll ask "What's wrong?" if you're looking glum. Great stuff.

Microsoft reps stressed that the Project Natal system (or whatever it ends up being called) will work on any existing or upcoming Xbox 360 consoles, and they're clearly positioning it as a Wiimote killer. Of course, whether a camera-based motion-control system really is more fun than playing with a Wiimote remains to be seen.

As I mentioned before, no specific word on when we'll see the Natal camera system (you can check out video of Natal in action on the Xbox.com home page) or any motion-control supported games, although Microsoft says that a development kit for Natal is ready for gaming partners. Thoughts? Post 'em below.

Other news in what turned out to be an unusually news-packed press conference: Yes, Facebook and Twitter integration are both coming to Xbox Live this fall, complete with Xbox Live avatars, plus the ability to update your status directly from the console, link up your Live buddies with their Facebook profiles, and view photos in a full-screen mode.

Meanwhile, the Zune Video Marketplace will indeed be taking over the Xbox Live video store, and its most impressive new feature takes a direct shot at Apple TV (which has a top resolution of 720p) and iTunes (which doesn't allow video streaming): instant-on, streaming 1080p HD video, no downloads or waiting required (assuming you have the bandwidth, of course; if you don't, the stream will automatically gear down its resolution). You'll also be able to watch movies and TV shows with an Xbox Live party, complete with your Live avatars appearing in a row of chairs below the picture, MST3K-style. (Still no specific word on whether movie rentals are coming to the Zune or the just-announced Zune HD, though.)

The Xbox 360's Netflix player will also get a cool (and belated) new tweak this fall: the ability to browse for and add new movies and TV shows directly from the console, no PC required.

Finally, we saw lots of gaming demos for the 360, including trailers and gameplay footage for the hotly anticipated Halo: ODST (plus the announcement of a mysterious new title, Halo: Reach, due next fall), Final Fantasy XIII (now with a U.S. "target" date of spring 2010), Left 4 Dead 2 (finally confirmed, and due November 17), and Modern Warfare 2.

Also, a surprise for Xbox gamers (not to mention a blow for Sony): Metal Gear Solid is coming to the Xbox 360. The upcoming game will be called "Metal Gear Solid Rising," focusing this time on Raiden rather than Solid Snake, and "development is currently underway." No word on when this "completely new" game in the Metal Gear Solid franchise (long a PlayStation exclusive) will hit stores.

Whew—that's a lot of news, and I have to say this is one of the most impressive E3 keynotes I've ever seen. Now if Microsoft would only announce a whisper-quiet 360 console, we'd be all set.

So, initial impressions of Natal, the new Facebook and Twitter features, Zune Video on Live with instant-on 1080p video, or any of the new games? Fire away.

Update: With so much news coming out of Microsoft's E3 keynote, I totally forgot to mention another upcoming Live feature (set for the fall): free streaming music via Last.FM for Xbox Live Gold members.