Peter Molyneux keeps Milo and Kate locked up

Now that Microsoft's Kinect control system is out of the bag, people are wondering whatever happened to Peter Molyneux's creepy virtual boy demo from E3 2009, Milo and Kate.

The 'game', which was the the showcase demo at Project Natal's introduction last year, featured an uncomfortably sentient youth who could interact with a user in ways which had never been seen before. Milo was apparently able to recognise individual faces, carry out intelligent conversations and even gauge the mood of a real, honest-to-goodness human.

When it became clear that Project Natal would be getting a proper launch at this year's E3 event, it was assumed that Molyneux's digital boy would be back with more disturbingly realistic interaction, but the prepubescent pixelation failed to show.

Perhaps the irritatingly-upbeat virtual child had turned into a sulky virtual teenager and was refusing to come out of his virtual bedroom.

The truth of the matter is that Milo and Kate is still in development and was only being shown to a select band of 'famous people'.

"Milo still exists - absolutely, it still exists," British gaming god Peter Molyneux told CVG. "In fact, famous people are seeing it as we speak, probably. We're just not showing it to the press. "There's a very interesting reason why, but I can't tell you why. It absolutely exists."

Molyneux blamed Microsoft's PR goons for the lock-out.

Rumours abound that Lionhead Studios is looking for voice talent for the title, hence the celebrity invites at E3, but we reckon its more likely that Microsoft is trying to generate a blogosphere buzz by resorting to celebrity Twatterati.

Whatever the tactic, Molyneux reckons that Milo and Kate is coming along rather nicely.

"I promise you it is now ten times more amazing than you'd expect it to be from what you saw at [E3 2009] because what I showed in Milo then was just a tech demo. I think everyone asked: 'That was pretty fascinating, but what does it all mean?'

"It's only when you see it in its entirety and play it that you realise it's robust enough for people to play on their own."