A video of it can be seen here:
Natal promises to do all of these things shown in the video by Fall of 2010. Personally it seems unlikely that they will be able to get everything bug-free by then.
What many people asked, however, is what will happen to game controllers? Will the only piece of equipment keeping us attached to the real world soon be replaced by arm movements? I believe game controllers are here to stay for the time being but as time and technology progresses they may not be so.
Think about it this way. Could you imagine playing Gears of War or better yet Call of Duty matches online using only body movements? While the immersion would be quite interesting, I think it would personally feel clunky because I would have no idea how to control such a thing.
Natal is scheduled to release in Fall 2010. I guess we'll have to wait until then to see what the future holds.