PrimeSense's technology is focused around user-interface interaction so I assume Microsoft will be using PrimeSense for Dashboard and possibly menu navigation.

"PrimeSense has delivered an important component to the technology," said Ilan Spillinger, vice president of Xbox 360 hardware, "helping us deliver revolutionary controller-free entertainment experiences in the living room." Microsoft contends that Natal was developed in-house, but likely makes use of this and other licensed technologies. Microsoft's Project Natal, the company's entry into the motion-gaming field, was revealed at E3 2009 and is slated to be available during the holiday season this year.

Thanks, Joystiq.