The Microsoft Xbox 360 Kinect controller has done more than simply captivate millions—it’s captured the hearts and minds of thousands of homebrew hackers, the DIY community, and spurred a sudden Pandora’s Box flood of innovation.

At first, Microsoft didn’t know what they were looking at. In fact, they reacted to the emergence of people interested in hacking their Kinect device by bringing down the hammer in a vicious press statement vowing to prosecute hackers to the fullest extent of the law.

[box type=”info”]Happy Holidays! The SiliconANGLE news and editorial team came to a group decision: we wanted a few days off for the holidays. Since very little in the way of tech news is going to be happening over the next few days (and you’ll still be looking for content to voraciously consume), we’d round out the biggest stories of the year in an ongoing series called “What You Missed Living Under Your Rock During 2010.” For the rest of the series, go here. Want more detail about the stories discussed here?  Don’t forget click through on all the links.

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Editor-in-Chief Mark “Rizzn” Hopkins[/box]

This didn’t deter anyone from breaking the drivers on the device or stop Adafruit form putting out a $1k bounty on those drivers—which they upped to $3k after Microsoft published their threat. Soon thereafter, Alex P did break the drivers but he didn’t want the bounty. And, less than a week after that, the full open-source drivers were finally completed and released by Hector Martin. Unsurprisingly, the release of those drivers and their subsequent addition to video editing software, animation software, and other PC tools, quickly gave rise to an entire Kinect hacking community.

Seeing what they’d done, and what happened to the community, Microsoft rapidly backpedaled on their previous statements attempting to mollify the homebrew community. No, no, they said, when we called upon hackers we meant people illegally modifying our devices, not software engineers getting our drivers and making use of our devices. Perhaps if Microsoft had actually researched what Adafruit and others meant to do they wouldn’t have made this mistake… Needless to say, Microsoft quickly came out with a press release stating that hackers need not fear prosecution for playing with the Kinect.

With or without Microsoft’s tacit approval, it was too late. Pandora’s Box had been opened and an explosion of innovation hit the Internet over the next month.

Two brilliant homebrew backers took a Kinect and a light-projector to produce “The Greatest Puppet Show on Earth.” By using the motion-sensing architecture of the Kinect and a projector to beam the image of a bird-puppet on the wall, a puppeteer could hold her hand up in front of the Kinect and mime the actions of the bird, which would emulate them on the wall.

Next, MIT took the Kinect and hacked a gesture-based navigation mechanism for the Google Chrome browser. No more need for a mouse or keyboard with this, the user could just reach up towards the screen and navigate between pages with a flick of the wrist or a turn of the hand or a jab of the finger. Of course, at this point most readers are probably wondering about other gesture-based paradigms we’ve seen before in the movies and how close we are to having that?

Never fear, because not that long after that—also from MIT—the industrious students got together to bring us the now-infamous interface from Minority Report. Using edge detection and motion capture from within the Kinect’s own drivers, they wrote software that could track fingertip and hand positions and permit sweeping gestures to move and activate elements on a screen in the same way seen in the movie.

While all of this was going on, Microsoft saw an explosive boom in the total sales momentum of their products as Kinect sensors were flying off the shelves—even causing a fear that Microsoft might not have enough to sell when the gift-giving season came around. In the first month after its release, Kinect moved almost 2.5 million units making it the most sold peripheral for the entire year. Xbox 360 sales as well swelled with the high volume of Kinect units being bought up and taken home; and especially with Christmas looming a day away, that inertia is not expected to slow.

The last few huge innovations to hit the Kinect also happen to be a brilliant idea introduced at Georgia Tech College to use the input device to aid in the learning of sign language. With software now able to read nuanced gesture and movement of fingers using the Kinect motion- and edge-detection drivers, researchers were able to make simple code for detecting American Sign Language gestures. In this fashion, the Kinect could be used to teach the next generation of hearing and deaf children how to communicate in sign language. I think it could also be the advent of computers that could translate and understand sign language.

This is all with the Kinect only having been with us for two months.

For example, we can imagine the usefulness of gesture based sensing when combined with augmented reality and wearable computers and the advent of the use of the Kinect to do this is only the vanguard of other devices that will do the same thing. For today, the Kinect sits next to a television set–in the future may hold a sensor that could sit on the lapel of your shirt, or would be sewn into the cuff of your sleeve.

The depths of this amazing, enchanting Pandora’s Box have yet to be fully explored and I suspect we’ll see a lot more improvement and innovation with the months to come.