This is a leap in gaming! Its taking you another step forward into the game world. I like how the wii u gamepad will further immerse you into the game, 720 has raised the bar

(If its real)

Why?  The basic aspect of the technology is simple.  A projector.  The only challenging aspect is all the calculations to figure out how to properly augment the images so they are adjusted based on distance and to extract the user position. 

Understand, the majority of this has been worked on for years now.  The patent application (March 2012) was likely due to the publication of the information that circulated online.  Had that not happened, Microsoft probably would have held off on patenting the process they developed until much closer to a release.

would be cool if they have the right games to support this and I would buy it!

What if there is a chair or a lamp in the way...

"An RGB projector that handles the task of extending the display beyond the television, wrapping the gamer's room in graphics. A depth camera, integrated into the peripheral, could be used to help map the user's environment, with the projected image corrected to compensate for furniture and other objects — instead of seeing a chair painted with light, the projected image would adjust in order to help your furniture blend in."

So how is it going to compensate for missing walls, large windows, dark surfaces etc. Transparent glasses like google's prototype video that project 3D images inside the environment would work much better.

According to the patent, the projector, working in conjunction with Kinect, is supposed to adjust the display of images based on depth.  So if an object existed along the wall, the projector would use the data from Kinect to determine how to display it. 

Read the fricken patent before you sit and tell me how it works!

Claim 3 and 4 deal specifically with this exact subject matter:

"3.  The system of claim 1, further comprising instructions to: receive one or more of depth information and color information for the display environment from the depth camera; and display the peripheral image on the environmental surface of the display environment so that the peripheral image appears as a distortion-corrected extension of the primary image."

"4.   The system of claim 3, further comprising instructions to compensate for topography of the environmental surface described by the depth information so that the peripheral image appears as a geometrically distortion-corrected extension of the primary image."

How do you mean?

You have some seriously valid questions, which the patent doesn't necessarily address.

As for dark walls, apparently it will sense the room color and compensate the image for the room color.  So, it'll be REALLY interesting to see this thing work.

"5. The system of claim 3, wherein a camera is configured to detect color information by measuring color reflectivity from the environmental surface."

"6. The system of claim 5, further comprising instructions to compensate for a color of the environmental surface described by the color information so that the peripheral image appears as a color distortion-corrected extension of the primary image. "

That all being said, it is an accessory.  It is not a require component of the console.  If it doesn't work in your environment, bummer.  However, if you have a room where it will work, then you have the opportunity to have an enhanced gaming experience.  Yay you!

Just take a read through the majority of the responses here. Projecting stuff onto irregular messy surfaces is a big no no, I don't know if you like to watch content like that but 99% of people don't.

That device could even guess lottery numbers, it is still projecting stuff onto non-regular flat surfaces on its core functionality.

Just because a company is considering this it doesn't mean it is feasible. Look at the Nintendo's Virtual Boy or the Sega Activator (kinect like from 1994).

Those were huge messes due to being unpractical. Just like this unless you have flat surfaces 360º around you. And even having it, you can still be looking at a poor performance because you need a competent device to deliver that, if Microsoft eventually cheaps out at making this you could e looking at a kinect like type of responsiveness, which we all know how that went down the road.

Projecting will always imply doing so on flat surfaces. Unless your looking at a music event with special effects were the image can be distorted all over the place because no one will give a shit about it.

The device projects the graphics on all walls, right? So would someone have to move any objects out of the room in order for this to work? Because wouldn't the objects act like a body in front of a projector?