Fable, the action RPG for Xbox and later PC developed by Big Blue Box and Lionhead, was well received both critically and commercially, but in many ways the game did not live up to the lofty standards set for by Molyneux himself in the years preceding its release, with talk of a truly living, breathing world. The Microsoft-published game ended up as the highest selling new IP of the year on Xbox, which surely prompted Microsoft to take special notice. Since Fable's release, UK-based Lionhead has been acquired by the software giant, undoubtedly boosting the studio's available development resources.

Before demonstrating Lionhead's Xbox 360 followup Fable 2, Molyneux spoke at length on what he feels is missing from many games: a true emotional connection. Achieving such a connection in his own game is what has driven the design of Fable 2 in many ways. And it's not just any kind of emotional connection he hopes to provide.

"The thing I want you to feel--and it's going to be sappy, and you're going to say 'He's mad,' but--it's love. The big one," Molyneux said softly, clearly aware that it would be a tough sell to a jaded gaming audience.

This lofty goal will be pursued via your in-game relationship to various in-game entities: your potential spouse, your potential children, and--as Molyneux was thrilled to reveal--your dog.

"Of course you think I'm mad," the designer readily stated regarding the presence of the dog, adding, "The team thought I was mad."

Throughout Fable 2, you will be accompanied by an intensely loyal canine sidekick who will aid you in combat, uncover items for you, and, most importantly in Molyneux's eyes, provide companionship. From a gameplay perspective, the dog will in some ways replace the mini-map from the first game. "You could play the whole of Fable 1 by just looking at that bloody mini-map," grumbled Molyneux, stating a desire to provide an incentive to keep players' eyes on the screen. The dog will continually provide short-range reconnaissance, identifying hidden items and nearby enemies.

Upon spotting hostile characters, the dog stands still and growls in their direction, not engaging in combat until you initiate a battle. Once you begin attacking, it picks its enemy based on your behavior. If you draw your sword and go for sword-bearing enemies, it will attack gun-wielding enemies, and vice versa.

Most of this activity is kept at a distance; the dog is not constantly running around your feet and getting in the way. "He's got one overridingly important characteristic, which is not to annoy you," explained Molyneux. When idle, it will roam around close by, wag its tail, and generally be a dog. All of this is very well animated and lifelike, and Molyneux promises that players will form a bond with their pet, adding, "In every test we do, even people who hate dogs fall in love."

Despite his confidence in the mechanic, Molyneux did not speak at great length on plot points relating to the dog, preferring to keep the story a surprise. In particular, he refused to answer any questions relating to whether the dog can die or, if it can die, what the in-game consequences would be. Instead, he insisted that the team has a compelling and affecting arc in place. "We reckon you're going to care about this guy, and once you do, we've got you," he said. "It will be the best story you've played in a long time."

And why not a cat? Said Molyneux succinctly, "Cats are selfish buggers."

Expressions return from Fable, allowing your character to gesture positively, negatively, or in various social ways. This is one method by which you communicate with your dog, giving it various types of feedback depending on how you would like to shape its behavior. This was actually the element of the dog demonstration that seemed unfortunately artificial; scolding the dog, even with the most severe scolding gesture, resulted in the dog adopting a shamed pose for a few seconds but then immediately return to its happy tail-wagging state. It is not a crucial issue, but it came off as very "video game-like," which ran contrary to the intended natural feeling of the dog.

As a side note, Molyneux spent a few minutes speaking about the appeal of farting in English society, which explains the bodily function's inclusion in both Fable games. "We in England think this is hilariously funny and will sell tens of thousands of copies," he said. "That's all I have to do with the English audience."

Also like its predecessor, Fable 2 will have an alignment system that physically morphs your character, mirroring your internal virtue or maliciousness with outward beauty or grotesqueness. This will extend to your dog, with good characters' pets tending towards fluffiness and evil characters' pets resembling black Dobermans.

The reputation system is set to take a more obvious role in the world this time around. "In [most] computer games, the world doesn't appreciate what I do," Molyneux lamented. "This world will react to what you do."

There are new physical morphs that map to character actions in Fable 2, the result of an expanded reputation scale. Attributes such as wealth vs. poverty and kindness vs. cruelty (a subtle distinction from good vs. evil) will also have an affect on your character model.

As Molyneux guided his character through some urban streets, we could hear NPCs chatting idly about various topics. In addition to discussing their own affairs, such characters may comment on your own achievements, in suitably enthusiastic or hateful tone depending on your particular brand of adventuring.

This version of Fable 2 was still deep in development, leading to a fair range of visual fidelity from location to location. Molyneux noted that he had verbal arguments with the team over whether he should show the build to press. Though the open fields and forest areas showcasing the dog were clearly lacking several levels of polish, the city of Bowerstone was extremely attractive, with appropriately characteristic and uniquely designed districts.

Set 500 years after the events of Fable, Bowerstone has changed a great deal. It is now a sprawling urban metropolis, rather than a village of 40 homes. Molyneux took great pleasure in revealing that players will be able to acquire any and every piece of real estate and business in the city if they so desire--and not just the houses and shops.

"Don't I want to own the castle?" he asked. "That would be cool." And this principle applies not just to Bowerstone, but to the entire in-game world of Albion, including playable dungeons. Resourceful players will be able to acquire dungeons through which they have actually quested, opening up new areas. With enough effort and economic instinct, players can becoming King and, eventually, Emperor.

All of this ownership affects the world, Molyneux claims. Dominating an area and raising prices will have a tangible effect on the condition of that area, with other inhabitants potentially unable to afford the changing cost of living. Throughout the session, Molyneux seemed reticent to discuss aspects of the game not yet fully complete, such as the combat system, but when it came to the reactive in-world economy, he confidently stated, "Nailed. Absolutely."

He even returned to a promise once made for the original Fable, that you could plant an acorn and many years later find a mighty oak tree. "You know the trouble I got in with acorns and oak trees? We're not stopping with acorns," he said. Areas throughout the world are dynamic. Helping a lonely band of gypsies, for example, might over a long period of time result in a town springing up where they prospered. On the other hand, killing them off will allow the existing forest to continue surviving. These are planned options, rather than truly dynamic systems, but they do operate on a scale; that is, various levels of help you provide to the gypsies will result in a town of various sizes.

Speaking of leaving one's mark, Fable 2 will allow players to get married, have children--and even get pregnant. Players can choose either a male or female avatar at the beginning of the game, and can experience the boy-meets-girl progression from either perspective. As in Fable, same-sex marriage returns (though they cannot have children), along with the addition of polygamy. Pregnant characters need not worry about the safety of their unborn children; it is impossible for the child to be harmed either before or after birth; similarly, being pregnant does not affect one's combat effectiveness. "We've had enough problems with the ratings as it is," explained Molyneux.

Once again addressing his reputation as a designer with promises too big to be kept, Molyneux made it clear that he's playing for keeps this time around. "This is a big one for me," he said sincerely. "If I can't get this right, I shouldn't be in this industry."

Lionhead's Fable 2 is expected for release some time in 2008.