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Seems like a really neat idea. I love the idea of being immersed in a video game without having to wear headgear, or building a $50k crazy setup. Obviously the point of this type of setup is different than a fully 3D interactive experience. I'm guessing the effect is pretty powerful, because really, all you need to focus on is the center of the action (the tv), and the peripheral information could be low-res, and blurry and still help with the immersion.
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Wow, that wobble effect looks fantastic.
There's so much potential here to introduce a product or couple this with the Xbox. I'm not as interested in the video game aspects as the general use ones -- movies, videos, etc.. I would consider buying a Blu-ray if it added specific content that increased immersion using this device.
When originally revealed, the XBox One was supposed to have this. This was then decided against, as the price would have been way too high for a gaming console.
I don't think that's a good idea. If the director didn't intend for a work to have these immersive lights as part of their work, then you are adding a dimension to it that could change the work's meaning.

E.g. What if you used this with the crazy freakout scene at the end of 2001: A Space Odyssey and it totally changed the meaning of the film? Wouldn't that diminish the purpose of the work?

I really wish I could see those videos on Linux. It certainly looks cool, but it seems they need some sort of Windows media player plugin. Was anyone able to see them in some other way?
Can you play .asf files with Mplayer or VLC media player?

If so, try:

http://msrvideo.vo.msecnd.net/rmcvideos/191304/191304.asf

The other two videos can be downloaded. Added .mp4 downloads for completeness:

http://msrvideo.vo.msecnd.net/rmcvideos/179806/dl/179806.mp4

http://msrvideo.vo.msecnd.net/rmcvideos/179795/dl/179795.mp4

Just tested it. You can play .asf files in VLC, or open it through a network stream.
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I don't know because of what, but in Ubuntu Chromium uses the VLC plugin automagically.
This is a great idea, but I should note that it was originally demoed at the beginning of the year [1], and MS have since decided not to pursue it commercially[2].

[1]: http://www.gamasutra.com/view/news/184581/

[2]: http://www.bbc.co.uk/news/technology-23943486

> Speaking to the AusGamers website he [Albert Penello] said that the concept would remain as "just research" for the foreseeable future.

That's a shame, it does look very cool and a lot of fun. I hope that Penello has a very short time frame which he considers "forseeable future".

Just imagine watching TRON: Legacy with this...

Or imagine being instructed with light beams to Kinect captured objects... Interactive software doing mind tricks on you with just beams of light...

Priceless.

boblightd provides this for Linux, lots of people roll their own versions of this for their XBMC/OpenELEC setups.
It's very impressive. And they have hidden it behind some annoying browser plugin requirement. I don't understand it.