Microsoft has unveiled its much rumoured motion controller at E3 along with 1080p video-streaming, facebook and twitter integration, and Premier League football as part of Microsoft’s deal with Sky.

“Project Natal” is not as many were expecting a hand-held controller but rather a motion sensing camera, like the Eye Toy, but hopefully substantially less crappy.

Steven Spielberg lumbered on stage to demo the new technology, with his avatar moving in real time as he controled the UI. Unlike the Eye Toy which wasn’t really developed with any great vigour, Microsoft seem to have gone to town with Natal and look to have created a very immersive and interactive experience.

Maybe too interactive, because in an Orwellian overstep, Microsoft have included face recognition technology which will allow you to use the meat, sinew and cartilage, on the front of your head to as your password to log in to your Live account.

But Natal isn’t just for gaming: As Microsoft start to push the Xbox 360 as the home entertainment mega-hub, you’ll be able to use Natal to flick through your films and songs and use voice recognition to issue commands.

The demo came complete with a very Wii-esque trailer of a family enjoyed the delights of Natal’s motion capture, although all the voices had been dubbed so grimly that the whole thing takes on this sort of uncanny and unnerving ambiance, like they’re trapped. It’s weird – watch it. It’s a far cry from the light-hearted japes of the Rednapp clan.

Microsoft look to have created an amazing and deeply immersive piece of kit here, but they still can’t make adverts. Not for toffees.

Watch this till the end – it’s a good advert and then in the last 10 seconds the way the light on the Natal unit switches off is so creepy!

Has no one at Microsoft seen Space Odyssey 2001? It couldn’t be more menacingly Hal-esque.