A human giant, wearing equally large sunglasses, is charging about the demo room like a child who's gobbled down too many blue Smarties. His limbs are flailing around as if desperate to grab those elusive gold tokens in the Crystal Dome, and he appears to be having a great time. Microsoft's Kudo Tsunoda has to be one of the most enthusiastic people I've ever met in the video game industry, and he's the perfect man to take the Xbox 360, together with Project Natal, to the masses.

There's about seven of us in the demo room with Kudo, all looking rather worse for wear as we approached the end of a long day at the Cologne convention centre, yet we're all laughing and smiling at his antics. For all the talk of the ground-breaking technology that powers Project Natal, the biggest revelation to come from my 30 minute demo was how much fun motion control can be.

Kudo began his demo with Ricochet, a Breakout-style game in which the player can use their entire body to send balls back down a closed room and into stacked blocks. It's a remarkably simple concept, but a great way to show off the full-body control Natal offers. A transparent avatar dominates the screen, mimicking Kudo's every move. And I mean every move. Kudo starts to gyrate his hips and so does the avatar, he high kicks and so does the avatar, he struts back and forth like John Travolta in Saturday Night Fever and yes, so does the avatar. He's not wearing a motion capture suit, yet the results seem comparable to the animation technology.

But is there some trickery afoot? Have Microsoft and Kudo created an elaborate demo sequence designed to fool all us all? Come and test it for yourself says Kudo, and before I can summon the strength to get up out of my chair, a European journalist has taken centre stage. Impressively there's no need to calibrate Natal to work with a new user; it recognises that someone new is standing in front of the camera and the avatar immediately changes to reflect this. Determined to catch out Natal, the Euro journo crouches down low and begins to waddle forward with his arms out to his sides to smack back approaching balls. Then he suddenly leaps up and attempts a Karate Kid-style high kick. Try as he might, Natal can't be faulted.

Richochet over, Kudo moved onto a racing demo which uses a modified version of EA's Burnout Paradise. There's no controller or racing wheel in sight. Steering the car is a case of putting your arms forward as if holding a steering wheel, while a step forward (as if putting your foot on the gas) accelerates and the same foot back brakes. It seemed to work, but having missed out on the Richochet demo, I had to try it for myself. I shot up and stepped into the driving seat. My hands grasped around an imaginary wheel, I put my right foot forward and the car screeched away. Not actually holding anything in my hands the controls felt slightly unnatural, but amazingly lag was negligible (Microsoft claims a 66ms delay, which is the same as that introduced by a standard controller) and I was able to scream around Paradise City with no problems. Kudo even tried to make me crash by standing beside to me and pretending to drive - somehow Natal knew that it was my actions and not his that it had to monitor.

Demos over Kudo switched his focus to the technology that makes Natal tick. The Natal sensor combines an RGB camera, infra-red depth sensor, multi array microphone and custom processor, making it possible to not only track the movement of up to four people, but also facial recognition and voice control.

The RGB video camera delivers your standard image (that you get with the current Xbox LIVE Vision camera) and enables functionality including facial recognition - something which could be used to sign into Xbox LIVE. Presumably this will also supply video for video chat and other video and photo functionality. It's the depth sensor, however, that elevates Natal to something special - an infra-red projector combined with a monochrome CMOS sensor (a technology to capture images in digital form) allows Natal to see the room in 3D. What's more it can do this under any lighting conditions, meaning the days of requiring an unnaturally well-lit room in order to play using a camera should be a thing of the past.

Add to this a multiarray microphone which Microsoft says will be able to locate voices around the room and extract ambient noise. This will bring voice control to Xbox 360 and enable users to chat on Xbox LIVE without the need to wear a headset. And all this is held together with a custom processor meaning the fancy motion tracking should not eat into the Xbox 360's horsepower - something demonstrated by the fact Burnout Paradise, a game not developed for Natal, is running with no perceivable negative impact on performance.

It's all well and good to have this impressive tech, but what of the games. We've seen how a driving game could work, but how would something like a first-person shooter shape up using Natal? Kudo, obviously well rehearsed on the subject of the FPS, explained how you might one day be shooting down aliens using nothing but your body. For starters you'd position your arms and hands as if holding a gun and you'd aim by pointing the imaginary gun. To move forward you move the gun towards the screen, bring it back to move back. Likewise, moving the gun to either side would strafe. Jump by jumping, knife an enemy by making a slashing motion, throw a grenade by... well, you've got the idea. And what about firing your gun? Use the trigger finger, of course. It's too early to know if this will work when put into practice, but the possibility is certainly there.

There's also the potential for Natal to be used in addition to the conventional controller. All your core control mechanics such as movement, aiming and firing can be handled on the controller, but Natal could be utilised to add-in elements such as leaning or use slight head movement for a free-look, whilst also aiming with an analogue stick - elements traditionally locked together with dual-stick controller play.

I'll admit that I was hugely sceptical about Natal before my gamescom 2009 demonstration, but I'm now a total convert. Sure, much of what has been seen is nothing more than tech demos, but the promise of more is there and, most importantly, the technology works.

Natal will be released at some point after 2009 and will work with all Xbox 360 consoles.