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I know there was alot of chatter when Natal was anoounced, as to where it came from, so seems that some work was done on it from this unit in M$:

"Outsiders on Wall Street and in Silicon Valley gripe that Microsoft has little to show for its patience, but Rashid says Microsoft Research (MSR) has made important contributions to new products. Natal, a gaming system launched in June, is based on work from the research unit's Cambridge, England, lab. Bing, Microsoft's search engine, includes innovations from MSR. Another research team, led by Lili Cheng, is integrating social networking into the corporate world. Some of her ideas will be built into an upcoming version of the Outlook e-mail program, making it easier to organize messages from certain friends or work groups."

http://www.businessweek.com/magazine/content/09_36/b4145044687973.htm

For anybody who's every worked on higher level degrees, there is always a constant battle about the usefulness of basic research vs. focus research.  It is expensive and unfocused with the goal of attaining knowledge for the sake of knowledge.  Seems that those Huge amounts of R&D expensed by M$ quarterly get funneled into this unit.  850 researchers is a HEAVY bill to pay, since you can be assured those folks are making higher 5-figures and most likely 6-figures.



"...You can't kill ideas with a sword, and you can't sink belief structures with a broadside. You defeat them by making them change..."

- From By Schism Rent Asunder