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STEVE CHIOTAKIS: The Microsoft Kinect is a new video game system you plug into your X-Box console. Users don't have to hold any controller and worry about pressing this or toggling that. Kinect uses sensors, cameras, even voice recognition to track where you are. It 'sees' what you're doing in your own home. Sound a little creepy?
Here's reporter Sally Herships.
SALLY HERSHIPS: Katja Schroeder and her husband Henry Trieu live in Brooklyn. They have a four year old daughter and for Christmas the family bought a Kinect, Microsoft's new game system. They set it up in their living room and went on a virtual white water rafting trip. As they were playing the game snapped pictures of the family. And at the end they were flashed on the screen.
KATJA SCHROEDER: And we were like, what are these pictures doing and where are they going? And so Henry was immediately running to his computer and checking where they're going.
Nowhere -- without their permission. Microsoft says photos and videos are saved to the X-Box. But users can upload them to Kinectshare.com where files can be shared online or downloaded. Schroeder and Trieu were still concerned.
SCHROEDER: You don't want to have pictures of you being distributed if you don't want them to be distributed.
HENRY TRIEU: I mean, you can't play this in your underwear.
At a recent presentation for investors, Microsoft said the ability to see into consumer's living rooms means advertising opportunities. Kinect's cameras can be used to identify people, or objects. Then share shopper's preferences with advertisers. Brett Gordon teaches Marketing at Columbia University.
BRETT GORDON: They don't just want to show you an ad and think that you may or may not buy. They'd like to really really know that that's going to be such a well placed, well targeted ad that you have a really high likelihood of buying.
Gordon says if Microsoft could count the number of people watching ads they could charge advertisers more. Microsoft says this isn't part of their current plan. But would consumers let cameras in their Living Rooms? Betsy MacKay says yes. She lives in Dallas and describes herself as a busy working mom.
BETSY MACKAY: So the fact that advertisers are targeting me because they understand more closely what I like and what I might be interested in buying -- that's good old capitalism at work. That just made my life a little bit easier.
Microsoft says the targeted ad capabilities of the Kinect are only an idea for the future. But if you are a Kinect owner now and worried about privacy, follow Brooklynite Henry Trieu's advice. Keep your clothes on.
I'm Sally Herships for Marketplace.