Arguably the Bell of the Ball at E3 already (and that’s before the Expo has officially started), Microsoft blew minds yesterday with their unveiling of Project Natal.

Project Natal is the code name for their long rumored motion controller, designed to compete directly with Nintendo’s Wii-mote technology.  Except for, if the tech demo below is any indication of real world use….they’re going to blow it away.

I use no hyperbole in saying that if Microsoft delivers on the technology as demonstrated here, the future is now.  But two barriers stand in their way…delivering on the hype, and pricing it appropriately.

Sure, Microsoft can worm their way into my heart with their excellent musical selection (that’s Los Campesinos, btw), but if this controller is priced at the rumored $200 point when it hits in 2010, this may be a whole lot of awesome tech with very few people around to impress.

For an example of how this could seriously redefine tech, look no further than the Milo demo, created by Peter Molyneux.  Long known for changing the way we interact with gaming characters…what if the character was…real?   This proof-of-concept video is equally enthralling and haunting.

Your thoughts on the Natal?  Is it Microsoft’s big thing? Or a big bust? Let me know what you think in the comments.