Microsoft used to ridicule Nintendo's motion sensing WiiMote and has stated several times that they have no plans for a similar motion sensing controller. But Wii's phenomenal success seems to have convinced them the other way around.
"Imagine a game machine where you're just going to pick up the bat and swing it or the tennis racket and swing it", said Microsoft chairman Bill Gates at the All Things D conference. Expectedly, the question was asked: "doesn't Wii already do that?" and Bill's response was "No, that's not it. You can't pick up your tennis racket. And swing it."
The system Bill Gates described is not a new console or a new add-on for Xbox 360, but rather a camera and software to capture and analyze player movements. Bill didn't give further details but at least 2 cameras are needed for the system to be able to interpret movements in 3 dimensions (Microsoft's Surface Computer uses 4 cameras).
The aforementioned technology is not new. Several algorithms and systems already utilize it, but it has always been encumbered by large error rate and being the need for too much processing power. While Xbox 360 won't suffer much from the system's CPU load, we’d still like to see how precise the system would be.