Microsoft plans to release a next-generation Kinect device so accurate it can lip read, sources have told Eurogamer.
Kinect 2 will come bundled with future Xbox consoles, we understand.
The intention is that Kinect 2 will offer improved motion sensing and voice recognition.
One development source told Eurogamer that Kinect 2 will be so powerful it will enable games to lip read, detect when players are angry, and determine in which direction they are facing.
Kinect 2 can track the pitch and volume of player voices and facial characteristics to measure different emotional states.
The current Kinect is hamstrung by having to pass data to the Xbox 360 through ageing USB technology - an issue discussed by Eurogamer last year.
When Kinect launched in November 2010 the depth sensor was set at a 30 frames per second limit and a 320x240 resolution limit. The issue relates to the USB controller interface, which is capable of around 35MB/s, but it only uses around 15/16MB/s. This artificial limit is in place because multiple USB devices can be used at once on an Xbox 360.
Kinect 2, however, can feed the next Xbox more information, and thus a higher resolution CCD [charge-coupled device].
"It can be cabled straight through on any number of technologies that just take phenomenally high res data straight to the main processor and straight to the main RAM and ask, what do you want to do with it?" our source said.
Microsoft reportedly plans to launch two very different versions of the next Xbox.
According to a Digital Foundry report on GamesIndustry.biz, the first is a "pared down machine" to be released as cheaply as possible. It is likened to a set-top box, and will act as a Kinect-themed gaming portal.
The second is a "more fully-featured machine" with optical drive, hard disk and backwards compatibility. This would be aimed at hardcore gamers and released at a higher price-point.
Next-generation talk has ramped up in recent weeks, with Edge reporting that the next Xbox will launch late next year.
Digital Foundry believes this is unlikely, however, suggesting a 2013 launch. The console is rumoured to be set for a reveal at E3 2012.
Edge also claimed advanced development kits were already at major publishers and their teams - a suggestion corroborated by Eurogamer sources. We have been unable to verify the rumour that AMD is providing the GPU, however.
A report by MSNerd called the next Xbox the Xbox Loop - or the Xbox TV, which may relate to the rumoured cheaper Kinect 2 SKU.
Eurogamer understands Loop was the codename of Microsoft's early motion-sensing technology that predated Nintendo's July 2008 Wii Motion Plus announcement. It was a device that wrapped around a player's arm, and was said to be more accurate than both the Wii and the PlayStation Move controller.
Microsoft told Eurogamer it "does not comment on rumour or speculation".