At Microsoft’s Xbox 360 media briefing at E3 2009 last week, the unveiling of Project Natal included a video presentation from Lionhead Studios, one of the Microsoft Game Studios developers.

In the video, a woman, Claire, interacts with a digital character of a young boy, Milo, on the screen. Aside from the digital boy responding to the emotional intonation in the woman’s voice—itself a paradigm-changing interaction—the most compelling moment of the demonstration is when the boy throws a pair of goggles at the woman. The woman instinctively reaches out to catch them.

In the video, Lionhead’s Peter Molyneux says that the demonstration was not acted. “She felt the need to reach down for those goggles. Everybody—every single person—that has experienced this reaches down.”

Let’s be clear. The goggles aren’t there. But because our interaction with the digital character is so life-like, we react to the interaction as if it was real life. To the point where we are instinctively attempting to catch an object that doesn’t exist.

This is the element of Natal that is so groundbreaking.

The interaction between Claire and Milo makes it clear that we don’t need to plug ourselves in, or wear headsets and visors to become immersed in an experience. Virtual reality can be attained with Natal.

All we need is to be convinced that an interaction is real and our brains take care of the rest.