Microsoft has announced the IllumiRoom. IllumiRoom is a proof of concept from Microsoft research, it is designed to extend the experience beyond the boundaries of your television.
This new concept is done by utilizing the Xbox Kinect camera to scan your living room. It is designed to push the boundary of living room immersive entertainment, by blending virtual and physical worlds with projected visualizations.
Below is the video released by Microsoft, the effects in the video are rendered in real-time and are captured live. No special effects added in post processing.