Time on Natal – see the full article for more background and details
What they came up with is a kind of self-contained module that you add onto your Xbox 360. It has a video camera in it that tracks where your body is and what you're doing with it. It also has a monochrome camera (it works with infrared) that reads depth — how far away your body and its component parts are — and a highly specialized microphone that can pick up voice commands. Along with all this hardware, it's got a ton of software that tells the Xbox how to find your body's various joints (it tracks 48 of them), how to keep track of multiple players at the same time, how to tell your Hawaiian shirt apart from the colorful wallpaper behind you, and so on. Microsoft even did an acoustic study of living rooms, so Project Natal can tell when you're talking, when your buddies are talking and when somebody in the game is talking, so it knows whom to take voice commands from.