The full story is here By R Colin Johnson, EE Times -- EDN, July 13, 2011
The best part here is:
"Last year Microsoft acquired the fabless chip maker, Canesta Inc (Sunnyvale, Calif) which makes a chip-level pattern recognition engine. Canesta's engine is said to outperform the PrimeSensor which Microsoft is currently licensing from PrimeSense Ltd. (Tel-Aviv, Israel) for its Kinect.
When Microsoft commercializes the Canesta-invented chip-level work-alike of the PrimeSensor, it will be able to downsize the foot-long Kinect to about a square centimeter, enabling tiny robots and other mobile devices, such as the Windows Phone, to perform sophisticated gesture recognition for natural user interfaces, autonomous navigation and many other tasks."
Thanks Microsoft :)