Controlling a computer by using gestures might be interesting on some niche markets, and on some occasions, but I don't think it will replace the traditional mouse-keyboard-configuration.
Another much hyperd input device, human speech, is around since almost 10 years, and hasn't replace the traditional systems either.
Some years ago the industry tried to tell us that it was interesting in some niche markets, like for medical secretarial work, and I do know some translators who use it, but even that use is rather limited.
Anyway: suppose somebody enters the room and says something, and your pc reacts to it.
Or your pc reacts to unvoluntary gestures from yourself, e.g. when you swap at a fly...
Those new systems have drawbacks.
My speech recognition system is almost never activated.
As a matter of fact, it isn't even installed at the moment.
It has a bit of a dream, a dream about easy control of a pc.
But once you're awake, it turns out to be very stubborn to be practical once implemented.

This is not going to work, period.

Facts: my kids get so frustrated with the fact that PS2 "gesture" games can't keep up with their gestures.

Fact: Logitech web cams can't do it either.

Fact: kids are great testers!

Their are just too many variables that can't be controlled, distance from the capture device. Do people stay in one place all the time? Shape of the person, does one person use the same PC all the time? On and on.

And it is just another piece of software to debug!

I assume that, in order for Natal to produce cost savings, it will need to be put together with a high quality speech recognition program. Between speech and gestures, the death of keyboards, mice and remotes seems more plausible.

i doubt it could replace the keyboard. typing is still one of the fastest, general-purpose methods of input.

physical gestures could replace the mouse, though. minority report, here we come!

"They call him Geoff the Bullet Dodger"
"Why do they call him the bullet dodger?"
"'Cause he dodges bullets"

The quote is just written down poorly. The cost reduction that he speaks of is the reduction in cost of the product, not cost reductions that the product will generate. As in, in the future this technology will be cheap enough that people will think that it should be "in most office environments".

To modify the quote "So Microsoft research and the product groups have a lot going on there, because you can use of the cost reduction of this technology that will take place over the coming years to say, why shouldn't that be in most office environments.

Well... peripherals following head movement are already out for flight sims and some racing sims.
Look up NaturalPoint TrackIR 5 Pro Head Tracker. Original name i know, but it makes the viewpoint move with your head. Does nothing else... but lots of fun.

Oh great, just as using a PC has become the norm and no longer nerdy, Natal will push the strides nerds have made back twenty years. The jocks will be kicking our asses all over again!

This makes me think what sort of things Microsoft could have accomplished on the PC, rather than pushing (and losing) literally billions on both XBoxes.

"A loud clatter of gunk music flooded through the Heart of Gold cabin as Zaphod searched the sub-etha radio wavebands for news of himself. The machine was rather difficult to operate. For years radios had been operated by means of pressing buttons and turning dials; then as the technology became more sophisticated the controls were made touch-sensitive - you merely had to brush the panels with your fingers; now all you had to do was wave your hand in the general direction of the components and hope. It saved a lot of muscular expenditure of course, but meant that you had to sit infuriatingly still if you wanted to keep listening to the same programme."

But Windows already does this. At least, I find myself using a particular gesture all the time when I'm using Windows...

Maybe now it'll recognize it.

This can be huge for handicap/accessibility applications.

An acquaintance of mine is purchasing a pile of netbooks and outfitting them with several accessibility apps for a local non-profit that works with individuals with special needs. This sort of functionality could put countless applications within, well, reach of these individuals.

Of course, some similar things already exist, but to get Microsoft behind it really makes it interesting.

em...I'd say Natal would bring rather cost growth, as many would probably destroy the surroundings of their PC.

The cost reduction is realized through the extra exercise you get making large gestures. No need for a gym membership.