The boys at Engadget became the objects of jealous rage across the tech community today when they posted up a video and a lengthy report about their hands-on demo with project Natal. While Microsoft wouldn't let them show any pictures of the prototype motion sensor they did give Engadget a chance to play a few games on the new device.

Based on their first impressions, we can confirm that the Natal works almost as well as Microsoft's hype-filled video demos lead us to believe. Engadget said that the Natal's ability to create an avatar that follows your exact motions was 'more than a little eerie'. They didn't get to check out the new gadget's ability to scan-in real world items, but at least we have confirmation that Microsoft's new baby is the best motion capture device out there.

The hands-on video is a little boring visually (unless you like seeing tech writers flail about), since MS wouldn't let them take images of the working prototype, but it's packed with some cool information.

By far the most exciting thing about Engadget's demo was their talk with one of the Natal developers, who explained to them just how E3 2009's biggest star really works. The sensor contains a video camera to measure motion, and an infrared camera to measure depth. Microsoft's software takes this data and turns it into a point-map and a heat-map. Next it merges both maps together and creates a hyper-accurate image of motion in the room.

So we know basically how the Natal tracks movement so accurately, but what I want to know is how it is able to pick out and differentiate between multiple people on screen at once. We know the technology works, but that's about all.

This report does clear up some of our worries with Project Natal, but we still have a lot of questions. Hopefully we'll get some answers on when this hot new gadget will be coming out before too long.