Peter Molyneux, big boss at Lionhead, took the Microsoft E3 briefing stage to reveal what his team have been up to for the past few months. The answer is just a little nuts. Lionhead have been creating something that utilises Microsoft’s new ‘Project Natal‘ motion sensing camera, it’s called Milo.

Throwing to a video filmed at the Lionhead studios, Molyneux introduced ‘Milo’, a young boy on screen. A Lionhead employee, hooked up with a headset and standing in front of the motion camera, showed off the number of ways you can interact with Milo. Thanks to the camera and voice recognition, Milo reacted believably to the words, body movements and even the Lionhead employee’s tone of voice. It is actually incredibly impressive.

Molyneux, who understands that some may question the reality of the filmed demonstration, said ‘Milo’ will be shown behind closed doors at E3 this week. Presumably this is what he’s been itching to tell everyone about recently.

This could be damn big news, people. Expect a whole ton more soon.