This is a momentous moment, really. Obsidian Entertainment senior designer Chris Avellone is about to show, for the first time, Fallout: New Vegas running live. Let us not forget, Fallout 3, the game New Vegas spins off from, was one of the greatest - some say the greatest - games of this generation. And yet there is a palpable sense of scepticism from the audience. Perhaps even disappointment.

In this business, first impressions can be as damaging as they are potent. But they're often misleading. So it is with Fallout: New Vegas. Our first impression is that it looks just like Fallout 3, a game that'll be two years old this Christmas. Our first impression is that if Bethesda released New Vegas as a expansion, no-one would bat an eyelid.

Perhaps our first impressions have been unduly influenced. Obsidian is not Bethesda, and for some Fallout 3 fans the fact that the game is being built on an ageing game engine by a developer whose track record depresses as many as it impresses fills them with the fear.

How ironic. Fallout 3 fans cringe at the thought of New Vegas being farmed out to a developer that knows nothing of the cult series, so the theory goes. How many Fallout 1 and 2 fans who idolise old Black Isle Studios legends Tim Cain and Feargus Urquhart felt the same when they discovered that Bethesda was developing Fallout 3? And now the merry-go-round comes full circle as Avellone and other ex-Black Isle Studio developers find themselves returning to the world of Fallout. So, all you Bethesda-haters should be pleased, right?

It's not until Chris' presentation comes to an end that I realise just how misleading first impressions can be. Don't get me wrong: Fallout: New Vegas's visuals could be better than they are. But the game's strengths lie elsewhere. Wonky animations and ugly textures aren't the point; the point is that the quests and dialogue are so memorable and the game's post-apocalyptic Nevada setting is so atmospheric that all of New Vegas' imperfections melt away like the skin of a Ghoul.

Still, the issue of innovation hangs over New Vegas' head like a vulture waiting to pounce on a Brahmin corpse. New Vegas is not an expansion or an update. It's a proper sequel, set three years after the events of Fallout 3 and with a map just as big. We're not asking for Obsidian to rewrite the Fallout rulebook, but given that two years will have eventually passed between the two releases, it is only right that the developer improves on what's gone before.

Chris, it appears, agrees. In a lengthy gameplay demo he showcases scores of improvements and tweaks, and they begin with character creation. Fallout 3 began with your birth; New Vegas starts with your death. You're kidnapped by a group of thugs, shot twice in the head and then dumped in a shallow grave outside of a small town called Goodsprings. The only reason you survive is because your body is recovered by a mysterious robot called Victor, who takes you to Goodsprings' kindly healing hand, Doc Mitchell. The character creation process begins as you recuperate with the Doc in his house.

Via the same first-person NPC interaction we saw in Fallout 3, the Doc hands you a Reflectron and you adjust your appearance. All the options that were in Fallout 3 are present and correct, but because you haven't emerged from a Vault, you have a few new sliders to play with. The age slider, for example, lets you pump up your age to fifty or sixty, if you fancy looking like a weathered wasteland veteran. After settling on a name and an appearance, you walk over to a Vit-O-Matic Vigor-Tester - the Old West equivalent to a love tester machine - to spend points on statistics.

You then take a seat on the Doc's couch to "see if your dogs are still barking". He asks you to tell him how much various statements sound like something you'd say. Statements like "I 'aint given to relying on others for support", "I'm always fixin' to being the centre of attention", and "I charge in to deal with my problems head on". Then, a Rorschach test. At the end of the session, the Doc suggests tag skills. In this case, though, we ignore his advice completely and go for barter, explosives and guns. And that's it. Character creation's done, and the Doc shows us out. Compared to Fallout 3's lengthy character creation sequence, New Vegas' is over in a jiffy, as one of its retro-futuristic Fifties throwbacks might have said.

In true open world fashion, once you step out of Doc Mitchell's house you're good to go exploring the wasteland. You could visit Primm, a casino town with a giant rollercoaster overrun by the ominously-named Powder Gang. Or perhaps you'll trot off to Novak, a settlement built around a hotel and the Dinky the Dinosaur road sign, with a pre-war gift shop and an excellent spot for the town's snipers to defend against encroaching Caesar's Legion troops. Or what about the dangerous Black Mountain, home to stealth boy-wearing super mutants? Or, if you're feeling really brave, you could head straight to Helios One, a New California Republic base. The choice is yours.

Before you make it, the Doc hands you a Vault 21 outfit and perhaps Fallout's most iconic gadget, a Pip-Boy. "You ever get hurt out there, you come right back. I'll fix you up," he promises. "But try not to get killed any more."

Everything we've seen up to this point has been familiar. The Doc's house is quintessentially Fallout - a dusty, wheezing building that looks like it may collapse at any moment. Light streams in through a boarded up window. Walking, talking, navigating the Pip-Boy, it's all the same. But then we see something very new, and very interesting: Hardcore mode.

In Hardcore mode ammunition has weight, you need to carry water to stop yourself from dehydrating in the Mojave wasteland desert, and healing occurs over time. So, rather than recover hit points instantly after using a stimpack, as was the case in Fallout 3, it'll take several seconds. Chris suggests this will drastically change combat, and it's hard to argue. In Fallout 3 spamming stimpacks was an almost full-proof way to survive any scrap. Hardcore mode sounds rock hard, and that's sure to please fans. Some complained that Fallout 3 became something of a cakewalk after the halfway point because you simply overpowered the environment. If nothing else, Hardcore mode should prevent that happening in New Vegas.

It is out in the Mojave wasteland that we get our first glimpse of Obsidian's post-apocalyptic Nevada desert. "We wanted to maintain the ruined feel of Fallout, but at the same time the whole setup in Mojave is that the nuclear warheads did not hit this area as much as they hit the Capital Wasteland," Chris explains. So, the sky is blue rather than overcast and caked in ash. Iconic Old West vegetation sprouts up from the blood red ground (vegetation you can use to scavenge with your survival skill for various recipes). Twisters whirl about willy nilly. Big Horners - mutated big horner sheep - amble about much like the Brahmin from Fallout 3. But juxtaposing the Wild West twang is Fallout's retro futuristic Fifties Americana. It's BraveStarr meets The Jetsons.

You head towards The Prospectors Saloon to speak with local ranger Sunny Smiles. In the saloon, casino machines beep and woop - the Strip is nearby, of course, and we expect some kind of gambling mini-game will turn up at some point. Sunny is welcoming and helpful. She asks you to help clear out some geckos from a nearby ridge. You agree, and follow her outside.

At the ridge we see some of the improvements that have been made to combat first hand. While VATS works exactly the same as before, some weapons have unique abilities that mean they excel in certain circumstances. The Varmint Rifle, for example, does bonus critical damage and bonus damage against limbs rather than head shots. Chet, Goodsprings' local trader, sells weapon mods. Say you've got a 9mm pistol. An extended magazine gives you more bullets per clip, and a scope modification increases accuracy. The weapon model changes accordingly - in this case the scope results in a texture modification and an extended clip model. Unique weapons, like the All American sniper rifle, have special textures and in some cases brand new models and reload animations. The idea is that when you get a unique weapon it feels and behaves differently than a standard weapon. This, as Fallout 3 fans know, wasn't the case before.

Melee weapons now have special abilities, which you can unlock once you've levelled up your melee skill. Take the Nine Iron golf club, for example. Its special ability, which pops up on the right of the screen when in VATS, is called "Fore!". Fore! gives you added knock down with your attacks, at the cost of extra action points. You smack your unlucky opponent with the Nine Iron, sending them flying back in gruesome slow motion.

If Fallout 3's Capital Wasteland was a sandbox in which carnage happened to reign, New Vegas looks like it's been deliberately designed to make the player feel like combat was always part of the plan. The high level area called the Black Mountain is a case in point. It's one of the central locations in New Vegas. You can see almost everything from it, including the Strip, with the Lucky 38 (the game's version of the real-life Stratosphere Hotel) shooting up into the sky, and McCarran International Airport (home of a New California Republic military base) menacing over yonder. Unlike much of New Vegas, Black Mountain suffered many nuke explosions. As a result, its communications array is almost completely destroyed. But one station, called Black Mountain Radio, remains, broadcasting a warning: super mutants are plentiful, it says, and if you've got any sense you'll stay away.

Chris doesn't of course, and approaches the super mutant camp, taking a route that seems to have been carved into the ground just for stealthy players to enjoy. "We tried to make sure with our level design that we included stealth paths that go into all locations so sneaky characters feel special and can take advantage of the lack of security in some areas," he says.

Oh, Fallout 3's companions. They were annoying, weren't they, often getting lost and stuck in endless pathfinding conundrums? Hopefully, that'll be a thing of the past, because in New Vegas you can control your buddies with a companion wheel interface. It provides all of the options that were present for managing your companions in Fallout 3 without having to go into dialogue. You can have them take stimpacks, change their status from passive to aggressive and switch their loadouts all with only a couple of button presses.

So far, we only know two potential companions: Craig Boone, an ex-New California Republic soldier now defending the town of Novak from Ceaser's Legion troops, and Raul, a Mexican ghoul held captive by the super mutants inside the Black Mountain radio hut. I live in hope that a dog once again tags along for the ride.

While New Vegas' combat looks to have more depth than Fallout 3's, and there are a number of new weapons that look inspired, it's the quests and the locations that most impress. There's a clever one in the Black Mountain. Here, you'll find Nightkin, tough first generation super mutants who were part of the Master's army in Fallout 1. You'll also find a group of second generation super mutants that came from the military base in Fallout 2. Thankfully they're not as strong or as smart as the Nightkin. Tabitha, the Nightkin's disturbed leader, calls them "dumb dumbs".

The quest here involves turning the super mutants against each other by exploiting their paranoia. To do this, you interrupt the warning broadcast, convincing Tabitha that the dumb dumbs are revolting with a unique dialogue option prompted by your high speech skill (New Vegas will have loads of specialised dialogue options, tied into all of your abilities). Then, you sit back and watch the mutants go at it. But, as is often the case, you also get roped into the killing - and the situation calls for some serious firepower. Luckily, Chris has the grenade machine gun. Yes, the grenade machine gun. "It still makes me laugh when I hear about it," Chris says with a smile. "When I heard about it from our project director, he was like, it's a machine gun, but it fires grenades!" A mod increases its rate of fire, which just isn't fair. Poor super mutants.

The great thing about the Fallout games is they allow you to complete quests in different ways, often via some gleefully sadistic choices. In New Vegas, however, not only will you have multiple options, but you'll also have to contend with reputation. Back at Goodsprings, you end up deciding the fate of the entire town: After a Powder Ganger called Joe Cobb threatens to burn the place to the ground, you can convince the locals to get together for a last stand, ally with Cobb, or just ignore the whole situation. Help the town, and your reputation with Goodsprings will improve. In an NCR base called Helios One, what was once a solar energy plant built by Poseidon Energy, you can activate an orbital beam weapon, called Archimedes II, and destroy the entire encampment, reducing your reputation with the faction to rubble.

The reputation system is one of New Vegas' most interesting new mechanics. Chris promises that you'll be able to gain and lose reputation with all the major factions in the game, including the two potential "bad guy groups": the New California Republic and Caesar's Legion (the Brotherhood of Steel are in the game, but we don't know why). If you fancy it, you can piss them both off, which should make traversing the Mojave Wasteland particularly dangerous. But just how sophisticated the reputation system is, and how it can affect the story, remains a mystery, as does much of New Vegas' intriguing plot.

So yeah, first impressions can be misleading. After spending an hour with the game, I'm convinced New Vegas will be a brilliant, albeit familiar experience. The doubters will no doubt continue to doubt (though the Strip, yet to be revealed, may help in this regard). The quests we've seen look interesting, complex and fun. The writing strikes a similar tone to Fallout 3's, which will either disappoint if you're a Fallout traditionalist or delight if you're a Fallout 3 enthusiast. The combat looks the same, frankly. And the graphics... well, they do look tired. But digging beneath New Vegas' dusty surface reveals an open world role-playing game of huge promise. Second impressions, here we come.

Fallout: New Vegas is due out on the PC, Xbox 360 and PS3 this autumn.