Peter Molyneux shows 'Milo' for Project Natal

Lionhead founder and famed game designer Peter Molyneux took the stage at Microsoft's E3 press conference to demonstrate "Milo," a virtual boy who interacts with players via the Project Natal motion camera. After introducing the project, Molyneux presented a video of a Lionhead staffer speaking with Milo, who reacted to what she said -- and even wrote on a piece of paper held up to the screen ... like a real person.

Following the video, Molyneux addressed what was likely a considerable amount of doubt as to the simulation's validity saying that it will be demo'd in real time behind closed doors during E3. He said that Lionhead has been tinkering with Project Natal for several months, and that he feels "what developers do with Natal will change the landscape of games." We'll ask Milo what he thinks of that later in the week.