LOS ANGELES–After more than a year of speculation, we finally know what Microsoft’s new motion-control system is called. For those that have referred to it for a year as Project Natal, meet Kinect for Xbox 360.

On Sunday night, at the University of Southern California’s Galen Center here, and during a special performance by Cirque du Soleil, Microsoft finally and formally pulled back the wraps on its much-anticipated system, now known as Kinect, but originally the work of the Israeli company 3DV.

After sitting through (actually standing, as the press was placed on the floor of the arena for a couple of hours with no seats) the performance, in which the Cirque’s performers acted out and demonstrated a number of ways that Kinect can be used, my first impression is that Microsoft has hit on something with some serious potential. But at least as demonstrated Sunday, that potential hasn’t been fully realized.

It was tempting to think that Microsoft was taking Kinect a little too seriously during the performance, given the scale and scope of the event (more on that in a bit), but it’s clear that the company has a system on its hands that it plans to incorporate widely across its video gaming and digital living room environments.

And while it’s too soon to tell exactly how Kinect will be used, and what software is being developed for it–Microsoft will say a lot more Monday morning at its formal E3 press conference–one thing became clear Sunday night: with Kinect, and a sports game, and an exercise game for it, Microsoft is, among other things, putting Nintendo and its Wii, its Balance Board, its Wii Fit and Wii Sports squarely in its sights.

Clever entrance
After waiting in line for more than an hour, the thousands of people on hand for the Sunday night event were ushered inside the Galen Center. While we didn’t know what was in store, we were first taken through mock living rooms, where “normal” American families greeted us. We didn’t get to sit down, however, but were clearly being led to see how Kinect, nee Project Natal, is an integral part of the living room experience.

Everyone was then given a white poncho, with large shoulder pads, and awhile into the Cirque’s performance, I looked around the arena and had a definite sense of being part of some sort of religious revival, what with thousands of people sitting and standing together, all wearing identical shimmering white ponchos. No individuality here.

When the performance finally began, a loud, all-encompassing voice boomed out of speakers and began spelling out homilies, among them that history was about to be rewritten and that for the first time, human beings would be in control and that the machines are going to have to adapt to us.

“After 5 million years of evolution,” the voice boomed, “might the next step be the absence of an object?”

High on the walls of the arena were large digital screens, and these became the place where we were able to really see what Kinect is all about.

Far up one wall, a “real” living room was placed, and there, a “family” of mom and dad, brother and sister took turns playing all kinds of games and other experiences for Kinect. While not naming any of these games, it was clear that Microsoft was previewing what it would be showing off tomorrow.

At one point, a giant, glowing Xbox symbol rose out of the stage where the Cirque du Soleil performers were doing their thing. And on top of this stood one of the kids, who raised his arms and began to show how Kinect would mirror his movements.

The kid yelled out, “What’s your name?” And the disembodied system responded, with letters jumbled on a screen and then placed in order, “Kinect.”

A few minutes later, we saw how by walking in front of a Kinect system, your body movement is matched by that of an avatar on the screen. Then we saw how you can wave your arms to flip the pages of a large “book, “which in this case was used to embed photos Kinect was taking of the family.

Game time
And now it was time to play some games.

Standing in front of the Kinect system, the young boy began miming out the movements for a river rafting game, and high on the walls, on digital representations of giant TVs, we saw his avatar riding a raft, dipping and weaving his way down a river of rapids.

Soon, the raft morphed into a platform of sorts riding on rails and here, we saw one of the directions Microsoft and its developer partners are clearly going with Kinect: to score points, the kid had to wave his arms around in order to get his avatar to do the same and accurately hit a series of targets coming at him on different parts of the screen. If a target was high and to his left, that’s where he had to put his arms. Low and right? He had to put his arms there. And so on. This looked pretty cool, and was definitely one of the things that showed the device’s potential. It made me feel a little bit like it was Disneyland’s Jungle Cruise on crack.

Next up was a driving game, and not surprisingly, controlling the vehicle by miming a steering wheel with your hands.

The game itself looked kind of cool, and at one point, as the car vaulted high into the air on the screen, it slowed down and took on freedom of movement in 360 degrees, and was able to totally change direction and aim at a different set of targets. And then it became a flying car, with wings, which was being controlled by both the “brother” and the “sister,” each standing on one of the “wings.”

And then it was time for a “Star Wars” scene, and the avatar belonging to “dad” suddenly had a light saber in his hands, and “dad” was able to control it with nothing but his hands. First he was fending off Stormtroopers, and then, of course, it was time to battle Darth Vader.

That was all well and good for the kids and for men, but what about women? Well, then it was time for a yoga scene, and sure enough, Microsoft showed how Kinect can be used for a stylish yoga regimen, with the user’s avatar almost exactly mirroring her body motions. How exactly that will work in consumer software is not entirely clear to me, but I’m sure we’ll see on Monday.

By now I was seeing some of the strategy, and understanding how Microsoft seemed to be showing glimpses of its versions of the games and hardware that helped Nintendo’s Wii become such a hit.

The yoga demonstration and the flying car, for example, seemed to be aimed at Nintendo’s Balance Board. And then we saw a big multi-sports competition game, in which the family faced off in sports like Hurdles (jumping), javelin (throwing), bowling, beach volleyball, soccer and the 100-meter sprint. This was Wii Sports writ for Kinect.

There was also a dancing game, in which the performers showed how it was necessary to mimic an on-screen avatar’s moves precisely in order to get points–turning most of what we’d seen so far on its head, of course, in that the humans were now following the avatar, rather than the reverse.

And then, it was over.

Obviously, Sunday night’s event wasn’t meant to unveil specifics about the kinds of games that will be available when Kinect ships, likely this fall. That will come Monday, with Microsoft’s press conference. Nor did Microsoft talk pricing Sunday night.

But what it did was issue a clear challenge, both to Nintendo and its hugely popular Wii system, and to Sony, which is also working on its own motion control system, known until now as Move. Sony will likely be showing a lot more about Move–including perhaps another brand name–with its own press conference on Tuesday. And Nintendo, too, will be showing off its goods on Tuesday. So one has to wonder how it and Sony will answer Microsoft’s challenge.

My takeaway from Sunday night, as I alluded to above, is that Microsoft definitely thinks it has a game-changer with Kinect. And I surely see the potential. I hope that it will be showing a lot more on Monday, because with what we saw Sunday night, I’m impressed, but not all that much so. It was the sign of a nice addition to the motion controller wars, but not yet anything that completely upends things. And mainly that’s because nothing Microsoft showed Sunday night was all that much of a surprise. We’ve known about Project Natal for more than a year. This all seemed like obvious directions.

That might change on Monday, but unless it does, I’d have to say that Microsoft is going to have to work very hard in the coming months to live up to how seriously it is taking itself with Kinect.