Last night on Late Night with Jimmy Fallon Xbox’s Creative Director for Project Natal, Kudo Tsunoda, showed up with a prototype Natal to demo in front of a live crowd. It’s very cool to not only see the Natal in action, but to see it played by people who are obviously not directly connected to the device’s development (or completely in control of the demo).

The demo starts with the breakout style game shown at E3. Control looks a little laggy, and there’s definitely a bit of a learning curve. Kudo could play just fine, but both Jimmy Fallon and John Krasinski whiffed their first swing at the ball. One of the first things Fallon noticed when he stepped up to play was his hair, which changed from Tsunoda’s shoulder-length mop. Pretty cool, even if his exclamation sounded more than a little scripted.

The second demo showed off Burnout: Paradise, a game Microsoft has adapted to Natal just to showcase the precise control capability of their new peripheral. As you’d expect, Kudo took off without a hitch and flew through the streets. Fallon, on the other hand, maintained reasonable control for all of four and a half seconds before blasting into walls. All four people for the demo jumped in and out of the “driver’s seat” fairly smoothly, though the Natal did take a moment to recognize foot placement for putting the pedal to the floor.

So what of the red suits? It’s hard to say whether everyone threw on the Beastie Boy jumpsuits as a theatrical gimmick or because it made them that much easier for Natal to read. My guess would be the second. No one wants to demo the hottest news in the gaming world just to watch it flop live.

In any case, this is the first we’ve really seen Natal debuted by “consumers,” and it’s at least good to see that it works, even if the situation was constructed on Microsoft’s terms. Hopefully as development continues we’ll get to see more elaborate demonstrations in less controlled environments.

Promo videos always show the best side of things. That’s their point. To promote the goodness of something and get people interested in buying it. If you’re like me, you probably watch those videos with a healthy dose of salt in your hand. That’s exactly how I watched Microsoft’s promo video for Project Natal, their controller-less full body motion capture toy, but it didn’t work. Try as I might, my skepticism has left me. This thing looks like the ten year evolution of the Wii done in half the time.

Project Natal is a sensor bar, much like that of the Wii. Instead of picking up the signal of the infrared camera in the controller, though, Natal senses your movement. All of it. The bar is equipped with a couple 3D cameras and a microphone, allowing for voice recognition. I’m sure your imagination is already sprinting towards Dance Dance Revolution or punching Mike Tyson without worrying about throwing a controller. Watch the video below – it says it all.