OK, now this sounds nifty: Microsoft is experimenting with building its Kinect gesture-input system into notebook computers running Windows 8, says The Daily’s Matt Hickey:

A source at Microsoft has confirmed that the devices are indeed official prototypes of laptops featuring a Kinect sensor. In terms of functionality, there are hundreds of different ways that motion control could be leveraged in a portable. Gaming has the most obvious applications, but a Kinect-enabled laptop could also toggle between programs with the wave of a hand, or media controls could be tweaked with the wag of a finger. What’s more, motion-controlled portables could offer a new way for disabled individuals to interact with their devices.

I bought a Kinect for Xbox 360 a few months ago, but not so I could flail my arms and legs around looking like a fool in Dance Central (although that, too, is happening). Mostly, I was curious to see how Kinect would fit into Microsoft’s Xbox 360 dashboard update, which went live late Tuesday night.

To my delight, Kinect now plays a significant role in the dashboard. It’s no longer penned into special menus with limited functionality. Instead, Kinect now allows you to control almost any part of the Xbox 360 with voice commands and motion controls. And it works really well.

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When Sony announced a $50 price cut for the Playstation 3, I assumed Microsoft wouldn’t rush to do the same with the Xbox 360. The console is sitting on top of the sales charts in North America right now, so there’s no immediate need to drum up sales by slashing prices.

But that’s not stopping Walmart. A leaked flyer, provided to Joystiq, shows that the Xbox 360 4 GB bundle with Kinect will get a $50 price cut to $249 on August 28. The leaked flyer doesn’t show any price cuts for other Xbox 360 models or bundles.

Microsoft has distanced itself from the rollback. “Walmart made an independent decision to implement this temporary price cut,” the company told Joystiq. “We’ve made no announcements about price drops, and do not discuss our pricing plans in advance.”

I buy the claim that Walmart is acting alone. But while Microsoft calls it “temporary,” Walmart’s circular says nothing of the sort. And if the retailer can afford to roll back the price, I wonder how long it’ll be before other retailers — and Microsoft itself — do the same.

My gut still says that any price cuts on Microsoft’s end will be designed to sell more Kinect units, ahead of a big software push for the motion-sensing camera. New games like Dance Central 2 are on the way, and the Xbox 360 dashboard is getting a redesign with deeper Kinect support.

Microsoft’s got more ideas in store for Kinect, the motion-sensing Xbox 360 camera that launched last fall. This week, the company announced a lofty goal to create interactive advertising powered by voice and gestures.

Microsoft is calling them “NuAds,” and has walked through a few examples on the Microsoft Advertising blog. During an ad for Coke, for example, the user can say “Xbox Tweet” to share the ad on Twitter. An ad for Toyota might allow the user to say “Xbox Near Me” and find nearby dealerships, and an ad for another TV broadcast might let the user schedule a calendar reminder by saying “Xbox Schedule.”

Don’t worry, you’re not the only one who feels queasy at the sight of more intrusive ads in the name of “audience engagement” and “social advocacy,” but there is a silver lining here: If this is what helps Microsoft lure advertisers — and by extension content providers — to Internet television, then it’s all good.

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As promised, Microsoft’s making it easy for developers to create Kinect PC apps with a non-commercial Kinect for Windows software development kit.

The SDK provides access to raw data from Kinect’s motion sensors, skeletal tracking of one or two people, advanced audio processing (such as identifying a sound source) and plenty of sample code. To show how developers can make their own Kinect apps, Microsoft hosted a 24-hour coding session that resulted in a motion-controlled quadricopter, a virtual orchestra conducted by hand gestures and a video conferencing tool that can identify and zoom in on the speaker.

Just one problem: If you’re a Kinect owner who wants to see what the motion-sensing camera can do — beyond dancing video games on the Xbox 360, that is — Microsoft still doesn’t make it easy to find and download these creative Kinect PC apps.

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When Microsoft launched Kinect for Xbox 360 last November, it came with one big gotcha: You need at least six feet of open space between you and the motion-sensing camera, and preferably more. If you had a small apartment, Kinect was not for you.

Finally, third-party peripheral maker Nyko is trying to solve that problem with Zoom for Kinect, a $30 clip-on accessory that’s supposed to decrease the amount of open space required. Whereas Kinect’s ideal range is 8 feet to 10 feet, Zoom for Kinect reduces the ideal range to between 6 feet and 8 feet.

When trying out the Zoom for Kinect at Nyko’s E3 booth, I didn’t notice any issues with sensitivity. Actually, I was able to get within one arm’s length of the Kinect and still have my movements detected, although players have to stand farther back when more than one person is involved. The Xbox 360 only warned me to back off when I got within a foot of the device.

Zoom for Kinect is nothing more than a set of wide-angle lenses that sit in front of the Kinect camera. The attachment slides over the Kinect unit and locks into place when the lenses match up. The idea is so simple that I’m surprised Microsoft isn’t selling its own version, but I’m glad someone has given consideration to folks who don’t live in luxurious open spaces (read: college students, New York residents).

The Zoom for Kinect peripheral goes on sale August 16.

Good thing Microsoft had a packed line-up of Kinect games to show at its E3 press conference, because last week’s big rumor about live TV on the Xbox 360 turned out to be kind of a dud.

Kinect, the motion-sensing, audio-detecting Xbox 360 camera that launched last year, dominated the discussion at Microsoft’s press conference. I counted 15 announcements for games that will either support or require Kinect, plus a revamped console menu designed for gestures and voice.

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Microsoft is making what sounds like a lofty promise for Kinect: By year-end, the number of available games for the Xbox 360 motion sensor will triple.

But given that six months after launch, Kinect’s existing lineup stands at a mere 26 games, Microsoft promise isn’t that bold. Hitting 78 games should be cakewalk, and it’s sad to see the revolutionary controller get such little support from developers and publishers.

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Hulu Plus comes to Xbox Live on Friday, and Microsoft let me have an early look along with a Kinect loaner unit to check out voice and motion controls.

If you’re not familiar with Hulu Plus, it’s an $8 per month streaming movie service focused mainly on current television shows. The selection isn’t as broad as Hulu’s free website, but it’s the only way to get Hulu on set-top boxes, iPhones and iPads (without workarounds like PlayOn). It also lets you watch archived back seasons of many television shows, instead of just the most recent episodes.

The most striking thing about Hulu Plus on the Xbox 360 is how closely it resembles Netflix’s console app, and for that matter the entire Xbox 360 interface. Microsoft has imposed a nearly identical design, with a list of sections on the top left and tile-shaped movies and TV selections in a sliding horizontal strip down the middle. Even Hulu Plus’ search function works exactly the same way as Netflix, with a row of letters on top and a strip of results that narrows down as you type. Microsoft’s made some big strides in user interface lately, borrowing much of Windows Phone 7′s uniformity and design flourishes, and it shows here.

Kinect support, however, needs a lot of work.

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The most exciting thing about Microsoft’s Kinect is not that you can play a dancing game on the Xbox 360 without a controller, but that dozens of hackers have re-purposed the motion-sensing camera for their own wildly creative ideas.

Come this spring, Microsoft will make life a little easier for these enthusiasts with a non-commercial Kinect software development kit. But note the distinction here: a non-commercial SDK means that anyone who uses it can’t legally sell what they’ve created. The all-important commercial SDK is coming “at a later date.”

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The NPD Group’s North American video game sales figures usually present a chance for publishers to spin the facts and crow about their accomplishments. But in the industry’s second consecutive year of decline, Microsoft’s the only company with bragging rights.

Consumers spent $6.2 billion on the Xbox 360 last year, more than any other game console according to Microsoft. And in December, Microsoft sold 1.86 million Xbox 360s, making it the only game console to grow year-over-year last month.

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It was just over a year ago when PrimeSense showed me (and Harry, separately) a demo of the motion-sensing camera technology that helps power Microsoft’s Kinect game controller. Now, PrimeSense is spreading out and partnering with Asus for gesture control on PCs.

The WAVI Xtion is a motion sensor for browsing multimedia and Internet content, using PrimeSense’s camera and infrared sensor tech to track users in 3D space. It’s meant for home theater PCs and will be commercially available in the second quarter, price unspecified.

More exciting, I think, is Xtion PRO, a tool for third-party developers to create their own gesture-based applications and software. Asus plans to host an online store for developers to hawk their motion-sensing apps, presumably to consumers who buy the WAVI Xtion sensor. The PRO development tools are coming in February.

It all sounds kind of lofty, given that Asus is primarily a hardware company, but if all goes to plan on the software front, Asus could be the the first company to create a market for the creativity of Kinect hackers. We’ve seen some pretty impressive tech demos from hobbyists, so I can only imagine what would come from financial incentives in the form of an app marketplace.

PrimeSense will have the whole setup on display at the Consumer Electronics Show this week. I plan to check it out.

Once the Kinect hacks started flowing, interactive porn was bound to happen.

And so we have ThriXXX claiming the first working demo of motion-controlled groping. The company plans to make Kinect compatible with all of its sex games — “Fetish 3D” and “3D SexVilla” among them — next year. A tech demo, uploaded to YouTube is already flagged as inappropriate.

Obviously, ThriXXX’s games won’t be available on Xbox 360. They’re strictly for Windows, which means ThriXXX could potentially release the first commercial use of Kinect in a PC game. I really hope that doesn’t happen.

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If there was any doubt that Kinect is a smash-hit, Microsoft erased it with official sales figures: In 25 days, the company sold 2.5 million units. As ReadWriteWeb notes, Kinect is being adopted faster than the iPad.

In essence, Kinect has become the new Wii, the hot gaming toy on top of many holiday wishlists. If Microsoft can keep it up, Kinect could keep the Xbox 360 alive for at least another couple of years.

But following the arc of the Wii is as dangerous as it is lucrative. Indeed, the news of Kinect’s soaring sales pairs nicely with Ben Fritz’s look at the declining Wii in the Los Angeles Times. He notes that stereotypical non-gamers — the same folks Microsoft is targeting — eventually lost interest in the Wii and didn’t buy enough software, and now monthly hardware sales are behind the Xbox 360 and Playstation 3. Major publishers eventually soured on the console as well. Now that Microsoft has proven that people want Kinect, its challenge is to keep those customers around.

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The coolest use of Kinect that I’ve seen so far, even if Microsoft doesn’t approve.

The motion-tracking power of Kinect for Xbox 360 could soon be used in PCs or robots, whether Microsoft likes it or not.

A member of the Natural User Interface Group appears to have gained control over Microsoft’s motion-sensing camera. In one YouTube video, the hacker uses a Windows application to tilt the camera up and down. In another, a pair of videos provide feedback from Kinect’s depth and color sensors.

Engadget tracked down the hacker, who goes by “AlexP” in the NUI Group forums. He may not release his work to the public, intending instead to integrate it with CL Studio Live visualization software, but the quick hacking bodes well for other people who want to push Kinect beyond its intended use. There’s certainly an incentive; Adafruit Industries, a seller of do-it-yourself electronics kits, is offering a $2,000 reward to the first person to post open-source Kinect drivers.

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