Milo made his world debut in 2009 at the E3 Expo in Los Angeles
Microsoft has shown off its “virtual human” that reacts to a person’s emotions, body movements and voice.
Milo, as he is known, is designed for use with the firm’s hands-free Xbox 360 motion controller called Kinect.
The technology is the brainchild of veteran UK games designer Peter Molyneux.
“I want to introduce a new revolution in storytelling,” he told the TED (Technology, Entertainment and Design) Global conference in Oxford.
“Films, TV, even hallowed books, are just rubbish because they don’t involve me,” he said. “It’s a sea of blandness.”
Mr Molyneux said that he wanted to create a character “that seemed alive, that would look me in the eyes, and feel real”.
Milo was first shown off in a demo at the E3 expo in 2009, but has not been seen since.
“There was a huge row online about that with people saying ‘this can’t be real’,” Mr Molyneux said.
The live demonstration used Microsoft’s soon-to-be released Kinect controller, which uses a series of sensors, cameras and microphones to interpret a player’s intentions.