I stated I was especially interested in the recognition software for Microsoft's Project Natal as the motion capturing as demoed highlighted low accuracy and obvious delay.

However the current state of affairs seems to be a lot less advanced as Microsoft wanted us to believe:

"All I’m going to say about Milo is that its not legit. there were a lot of smoke and mirrors going on there, not the case with the ball demo [Ricochet] and the other stuff but with Milo there was definitely a little bit of deception going on."

http://gamer.blorge.com/2009/06/07/exposed-natel-milo-smoke-and-mirrors-by-peter-molyneux/

In hindsight I think Microsoft knew Sony was likely going to reveal powerful new technology, thus opted to try to steal the show, nomatter how deceptive they may be towards gamers and the press to achieve this goal.

Nintendo could have showed a video of a hollodeck for the Wii to up the ante as well, with very little actual merrit to steal the show.

LOL. What was deceptive about it? The voice recognition, facial recognition, etc? Did people actually think they had developed the most sophisticated AI of all time?

There was something else, I think on spong, where you can see differences between what the women is doing and what the ripples are doing, in some cases they move before she moves her arms, and sometimes they are doing different things, but I am just very confused what is happening with all this speculation about what is going on

Well, that's what Microsoft were trying to imply. We don't believe it, and that's exactly the point why people were making threads like these, because we don't think Microsoft actually made the first sentinent AI.

Ya its obvious Microsoft has pulled one over everyones eyes! SIGH......

Of course they didn't.  Even Pete told people that. 

This is going to be a retail product.  If you think they are going to ship it with someone to control it behind the scenes, I have some property I would like you to buy.

Come on, Peter Molyneux would never promise something that he couldn't deliver! Just look at Black & White, we all know after he demonstrated highly trainable sentient ai with that game it rapdily spread to every game and we've never dealt with scripted AI again. On top of that Project Ego (Fable) really was the greatest RPG of all time, and every decision you made as a young boy had massive consequences as you aged.

From what I remember from the MS conference (and not subsequent interview), Milo was implied to be almost like a real boy, who not only can read emotions, but have them as well.

To understand EVERYTHING about the supposed amazing IA :

french ITW of Peter Molyneux (translated) :

http://translate.google.com/translate?prev=hp&hl=fr&js=n&u=http%3A%2F%2Fwww.gamekult.com%2Farticles%2FA0000077061%2F&sl=fr&tl=en&history_state0=

With regard to artificial intelligence, I suspect that Milo does not really all that said, right?

Well, the honest answer - and you know I love being boastful enough to tell you that we have resolved one of the most complex of all time understanding exactly the human voice, but of course it is not the case, otherwise we'd all be billionaires riding in Rolls-Royce in gold - is that Milo does not include the entirety of what you say, it gives you the impression, the illusion, he understands. The way it works - and it is really good that you explain it to all those who continue to believe a hoax - is that we work with a company that specializes in speech recognition called Tellme Networks (acquired by Microsoft in March 2007 editor's note) to build databases of words Milo really understands. The value of these databases is that you can talk to Milo speech without using a split-type "Come, stop, left, right" but rather normal sentences to be analyzed so that Milo can recognize one or more words before to use them. This is the first thing important. The second is that over time Milo makes a profile of the user to assimilate emotions, timbre, tone and nature of her voice to give us clues about the topic of discussion. The third important point is that the controlling party in the conversation you have with Milo: if something happens to Kate - Kate is the dog Milo - just before you begin talking, then it can be assumed without too much risk that the discussion will look at the dog. All those things mixed together with a very complicated thing called neuro-linguistic programming persuade the player that he can really talk to Milo.

He can detect emotions(facial expressions, tone of voice), and he will be programmed to display emotions.  Nothing groundbreaking there.