Microsoft has shown off a proof-of-concept Xbox system called IllumiRoom at CES 2013 in Las Vegas.
The system uses Kinect and a projector to augment the area surrounding the television screen with projected visualizations.
According to Microsoft, IllumiRoom can "change the appearance of the room, induce apparent motion, extend the field of view, and enable entirely new game experiences."
The demo video below shows effects such as falling snow and explosions being projected into the living room. The video was captured live and is not the result of any special effects added in post production, Microsoft says.
The ground breaking display technology was first revealed via a Microsoft patent in September last year.
According to the patent, the system will utilise a 3D depth camera to calculate the player's position by emitting infrared light patterns. The Microsoft patent also stated that the tech will tie into the rumoured Kinect Glasses technology mentioned in a leaked Xbox 720 planning document.
More information on the concept system will be revealed at the CHI 2013 conference in Paris on April 27.