You’ve heard the news that came out of E3. A fancy new motion sensor. Molyneux’s talking-kid game-thingie. Facebook and Twitter…and a Marketplace for Avatars! But what you want is every single detail, neatly sorted and analyzed so you know exactly how your Xbox 360 will grow, change, and evolve in the coming months. Check out our guide to getting ready for all the slick new gizmos headed to your dashboard.

Avatar Marketplace

Release Date: Today

It’s been rumored forever, but it’s not the diabolical money-extractor that some haters feared it would be. Yes, an Avatar Marketplace channel is coming to your dashboard, and yup, you’ll be able to buy premium clothing there (there’s no set pricing; it’s up to the companies selling it). Microsoft promises a regular supply of free clothing, too, and best of all, it’s adding in-game awardables. So if you win the Super Bowl in Madden or score a killtacular in Halo 3, he developers can reward and recognize that feat with free clothing and/or costumes that open up in Avatar Marketplace. You’ll also find storefronts inside it dedicated to specific games like Halo 3.

But we’re all going to nerd out about props, which are essentially something that your Avatar holds in its hand, like a guitar, trophy, cell phone, or [shudder] pom poms. The coolest example we saw was a cute little Avatar dude dressed up in ODST armor holding a remote control that steered a tiny remote-controlled Warthog in circles around his feet.

Netflix Parties

Release Date: Today

Wahoo, at last! Yes, eight people will be able to gather in a lobby skinned to look like a movie theater and watch Netflix content together in real time. Of course, you can yak it up over voice chat, and as in 1 vs. 100, you can also tap buttons to trigger Avatar animations. The view is from behind as the Avatars sit on the couch — it reminded us a ton of Mystery Science Theater 3000. The update will also include improved Netflix functionality that lets you browse categories and add movies to your Instant Queue directly from your 360.

Games on Demand

Release Date: Today

This one’s already begun…sorta. The Xbox Originals section of Marketplace has been renamed Games On Demand. Come August, you’ll also be able to purchase older Xbox 360 games like Mass Effect, Assassin’s Creed, Oblivion, Civilization Revolution, Dirt, and more as downloads. Games won’t be released in stores and on Marketplace on the same day; it’ll be more of a “classics” program in the vein of Platinum Hits.

Manuals will be available on the Marketplace website, and you’ll be able to pay for these downloads with a credit card, debit card, or Microsoft Points. (Everything else on Marketplace still must be paid for with Points only.) We envision hard-drives filling up all over the place, but Microsoft had no specifics when we asked whether bigger HDs were on the way, saying only that they were keeping an eye on that. Hrmph.

Dashboard Improvements

Release Date: Today

We’re lumping together some small but cool stuff here, most notably the ability for user ratings of games and downloadable game add-ons. It’s a five-star system like Netflix’s: You simply select the title in Marketplace and click on the stars to register your opinion. In other news, Live’s network is being upgraded to improve its performance, particularly the guide and friends-list access. Microsoft’s also tweaking the view for Achievements, friends sorting, and its matchmaking support.

Last.fm

Release Date: Fall

Another new channel coming to your dashboard: Music. Along with stores for Rock Band, Guitar Hero, and Lips tunes, you’ll also find Last.fm, the web music powerhouse. It’s for Gold members only, and gives them access to millions of songs for free, as well as personalized stations. Not to get greedy...but what about Pandora? We love those guys!

Zune Marketplace & SkyTV

Release Date: Fall

Video Marketplace is being renamed Zune Marketplace, but that’s just branding. The real news is that with the new logo comes instant-on HD video in 1080p with 5.1 sound. And yes, by “instant-on,” Microsoft means that it aims to create a disc-like experience, including fast-forwarding and skipping with no lag while the download catches up.

Your broadband connection will need to clock in at at least 8Mbps downloading to support that, and if it doesn’t, the experience will be, um, adjusted to compensate. Fortunately, that speed is pretty standard, so most folks should be fine. We honestly find the instant-on stuff kinda hard to believe — especially given how laggy video has been for us on Xbox Live. But when questioned, Microsoft’s GM of Xbox Live, Marc Whitten, was very confident in the performance, saying they’d developed proprietary codecs that already were working at that level.

Last but not least, Zune Marketplace will be expanding support from the eight countries it’s currently in to 18, adding Australia, Austria, Belgium, Denmark, Finland, Netherlands, New Zealand, Norway, Sweden, and Switzerland (Hi, Europe and Down Under!). And if you live in the UK or Ireland, you’re extra-stoked. A deal with SkyTV means gamers there can watch live TV programming, including soccer and cricket matches, in the same eight-player party setting that’s coming to Netflix. Can you imagine if we could gather around an NFL or NBA game that way in the States?

Twitter

Release Date: Fall

It’s already everywhere, but soon Twitter will be on Xbox 360, too. It’ll be designed for use with a controller rather than a keyboard, and you’ll be able to read, reply, and post tweets from the dashboard. Crap, that was longer than 140 characters — we gotta start practicing!

Facebook

Release Date: Fall

Another winner in the get-your-own-channel-on-the-dashboard department, Facebook’s arrival on 360 has a cool Xbox-only twist: Facebook Connect. It’ll let you capture screens and stats from games that support it and send them to your Facebook profile.

The developers have to code this in, though, so while this feature won’t work with older titles, EA’s planning to have the next Tiger Woods game support it, for example. And of course, you’ll also be able to view your Facebook friends and photos, read updates, and submit your own.

Project Natal

Release Date: TBD (Our guess: Fall 2010)

We all knew it was coming; the rumors had gone on too long. So when Microsoft started talking about motion controllers at its E3 press conference earlier this summer, our first reaction was “of course.” Then they went ahead and blew us away with Project Natal, which is definitely not the Wii-alike that we were expecting. Natal’s promo reel (the one you’ve probably watched on your dashboard about five times by now; if not, you gotta see it) shows player movements being perfectly replicated on the TV screen. In a fighting game, the oh-so-happy-to-be-playing-games actors dodge blows and land punches; in racing games, they hold an imaginary steering wheel to drive; and in quiz-show games, they buzz in by smacking their fist into their palm.

The technology has implications beyond this kind of traditional gaming — the system recognizes your face, automatically signing your profile into Live. From there, you can try on Avatar clothing before you buy it, or use voice recognition and simple hand gestures to page through the dashboard with just a wave of your hand — or start a film by saying “play movie.”

All that’s hugely impressive in a concept video, but then we got to check it out in action and try it ourselves, and the technology is pretty amazing. First up was a simple physics-based ball game called Ricochet, where we swatted balls back at a wall of bricks by flailing our arms and legs. Every small movement or gesture, every step to the side, was reflected in the Avatar on the screen. When we struck the ball, the game clearly reacted to that movement. And it wasn’t just our limbs — our whole body was in play. The ball could be slapped, kicked, and even headbutted, and as more and more balls spawned, we needed to use every limb. We also tried a racing game, driving around in Burnout Paradise simply by holding our hands out in front of us and pretending to turn a steering wheel. It was eerie how quickly it felt natural and normal.

Then we got a behind-doors demo of Milo and Kate, the brainchild of Peter Molyneux, and that’s when the ways that Natal goes way beyond the Wii Remote really became clear. In this game, it’s not about jumping around and waving your arms like a lunatic; it’s about watching for emotional responses in the face and voice of Milo. He’s a child, roughly about 12 years old, who can identify you on sight, compliment you on your clothes, and understand your tone of voice. Tell him a joke, for example, and he’ll giggle politely — while he doesn’t understand the content of the gag, he understands the patterns in the way humans tell jokes and responds appropriately.

Natal also detected us trying to touch water on the screen, making the surface ripple realistically away from the fingerprint smudge we left on the TV. Most magical, though, was the way the camera reads a sheet of paper that you hold up to it, copying it into Milo’s world. Those kind of interactions will really break barriers in what games can do when they’re fully realized. Just imagine the possibilities if that sort of interaction makes it into Fable III, for example.

So how does this witchcraft work? Rather than the traditional setup found in a Live Vision camera, where there’s a single camera and a single microphone, Natal uses several forms of input to get a better image of your body’s position in 3D space. The device sits below or above your TV screen, and it has both a standard RGB camera (similar to the one in the Vision camera) and a black-and-white infrared sensor, which allows it to get a detailed idea of depth in even the gloomiest of rooms. Using data from these two cameras, the brains of the operation — a processor built into Natal that runs a custom piece of software — interprets the data and works out the position and shape of your body, determining where your arms, legs, torso, and head are in real time.

Depending on how the game wants to use that data, Natal is apparently accurate enough to detect the movements of individual fingers. Not only that, but it can also pick up multiple players in a single room, so we’d wager that Microsoft is shooting for up to four active players at once to match the four-controller input on Xbox 360.

Coupled with that location data is clever voice recognition, which recognizes specific words. Thanks to multiple microphones, it can also work out which player is speaking, allowing for multiplayer voice-activated gaming.

Essentially, Natal provides raw data, and it’s up to the game designers to decide how they use it. Perhaps the most exciting applications are the ones that allow you to interact with physical objects in the world — when you’re converted into a 3D avatar in the game, your body can be plugged into game physics that are already capable of calculating the force of, say, a punch to a face.

It’s clear that Natal has the potential to change the way we play games forever. While there are obvious ways the technology could be applied to casual and exercise-based games, remember that Natal isn’t a controller. That means it could easily be used in more hardcore games that require a controller as well, increasing immersion by reading the player’s response and adding more involving features — or in games we haven’t imagined yet. Natal’s final release is still a ways out, but with development kits already in the hands of major game studios, we can’t wait to see what the future holds.