That NATAL thing looked like a cheap gimmick for MS to get more casual gamers. Having said that, give it a while and a decent developer could do great things with it. I'm remaining skeptical of Peter Molly-new-ex's "Milo", but it can't be denied that AI of that intelligence, if implemented properly and not used as a gimmick, could be amazing.
For those of you who didn't watch E3, I'll give you a little summary. NATAL(?) uses a motion sensor that will use your body as the controller. Think off the old itoy game on the PS2 mixed with the wii. The default games were cheesy things such as a "3d breakout" and a painting game. Peter Molly-new-ex's studio, Lionhead, have used the technology to make an AI, a seemingly good one, that can recognise you and react to emotion in your voice.