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Project Natal will be of limited use for traditional games--yes, you could use it as an alternate controller for a variety of games but that's not its strength. Certain genres--fitness games, dance, some sports, etc.--work well and others like racing games or FPS aren't a good match. And Happy Squirrel is right on the money in that it's games that will drive the adoption (or lack thereof) of the peripheral.

Nothing that's been shown yet is enough to put it over the top. But having worked with the tech before the possibilities are good enough that really fun games can be created with it.