Perhaps the most interesting use for the Xbox 360's Kinect controller was Lionhead Studios' virtual child simulator Milo and Kate, though a lot of questions lingered over it. We first met the young lad Milo in 2009, carefree and innocent as he chatted with the player, but the project slipped out of sight and was eventually shelved. This, Peter Molyneux has said, is because the industry simply isn't ready for a such game built around forming an emotional bond.

Read more: "The wrong concept for what this industry currently is" »

According to anonymous sources talking to Eurogamer, Peter Molyneux and Lionhead's Kinect-enabled small child simulator Milo and Kate has been cancelled.

Development has been halted and nineteen contractors have been laid off, the source said, and the development resources will be ploughed into Lionhead's Fable franchise. The tech behind Milo may be cannibalised for a "Fable-themed Kinect game," it's said. Read more »

Earlier today the fate of Lionhead Studios' Project Milo appeared to be sealed when Australia-based ABC "Good Game" posted a clip of Xbox product director Aaron Greenberg saying definitively that the virtual child would not be brought to "market.""Last year we revealed the Project Natal technology and showed a bunch of technology demos as part of that," Greenberg said in the ABC video (skip to 0:40). "Right now it's not a game that we're planning to bring to market," he added. Today, however, Greenberg clarified his statements via Twitter saying, "Project Milo absolutely continues in development at Lionhead Studios, it is just not a product we plan to bring to market this holiday."

When pressed on Kinect functionality in Fable III during an E3 2010 roundtable discussion with journalists, Lionhead founder Peter Molyneux said there was a "really, really good reason why I can't talk about [Kinect functionality] and why I'm not allowed to talk about that. It's a very similar reason as to why I'm not talking about Milo." When word that Project Milo had been relegated to "tech demo" status began appearing online, Lionhead Studios' Sam Van Tilburgh tweeted a photo he dubbed "Team Milo." Read more »

Showcasing the capabilities of the new Xbox 360 Project Natal camera controller, which includes voice and motion-recognition functionality, Fable 2 developer Lionhead Studios showed a video demonstrating a virtual child called Milo.

Able to recognize facial expressions and vocal emotions, Milo chatted with real-life demonstrator Claire. Milo also threw her a pair of goggles (which she automatically grabbed for and then "put on"). Later, Milo grabbed a piece of paper that Claire held in front of the camera for a mere instant. Read more »