I just got to see this video from E3 with Peter Molyneux from Lionhead and the wonderful Project Natal gear that seems to work already, though you can never quite tell.
This however combines some Artificial life into the mix and Molyneux speaks about how everyone feels the immersion, picking things up, handing things over. There is of course an element of escapism required, but all our media requires that. Enough cues though and the brain engages, as with the few degrees of tilt on a fairground simulator, combined with a rushing video, the sense of speed, g force and braking becomes far greater as several senses are fooled at once.
Also the PS3 is showing what is does with a simple camera and markers, providing similar degrees of interaction without a controller with its forthcoming eye pet. The drawing of the toy for it to play with I am looking forward to see how it works. Its not on this viddler video but in the PS3 Home lounge I saw a kid draw a plane and it then rezzed as a cartoon plane that the pet flew away on. Very similar to the skateboard scanning in the earlier Natal trailer
So not only have we had the toe dipped in the water of removing the standard game controller, the rise of the Wiimote, the drums, guitar and microphones of rockband and guitar hero but we now also have gesture based computing, realtime on consumer entertainment platforms.
Whilst these are for pure entertainment, as the Wii balance board has shown they can move into actual exercise, real movement of real muscles. So think of Project Natal and alike providing a physio therapist the ability to remotely instruct on exercise with a good degree of feedback on actual performance of the patient, kids to rehearse their dance moves for upcoming shows with one another in different schools, an emerging science of remote body language (do we use the same signals as we do in real life when instrumented in this way). The list goes on. Of course this can also still work sat at a desk, pointing at things, handing things to one another and mixed with traditional communication media.
This is showing the way leading to some new interaction paradigms for people. It is also very real. There may be the odd bit of hype but we are now getting several generations into the technology. Next it goes mobile and we have full AR in a consumer package. How exciting is that !