Kinect for Xbox One has been somewhat enhanced over the previous model, but to achieve this, the research team of Microsoft and its hardware partners (Silicon Architecture and Management) had to overcome several obstacles during the development phase. Succeeding in fact to improve the device, increasing the precision in the detection of objects without sacrificing performance, has not been an easy task.

But Microsoft is no stranger to controversy when it comes to the Xbox One. The Redmond company found itself in hot water again this week over a story in Advertising Age that stated Microsoft is planning advertising on the next-generation video game console.

Yusuf Mehdi, corporate VP-marketing and strategy for Microsoft, speaking to the Association of National Advertisers Masters of Marketing Conference in Phoenix Oct. 5, said the advances in Xbox imaging technology could lead to “gamification” movement in advertising.

“We are trying to bridge some of the world between online and offline,” he said. “That’s a little bit of a holy grail in terms of how you understand the consumer in that 360 degrees of their life. We have a pretty unique position at Microsoft because of what we do with digital, as well as more and more with television because of Xbox. It’s early days, but we’re starting to put that together in more of a unifying way, and hopefully at some point we can start to offer that to advertisers broadly.”

Many wonder now if Microsoft intends to also share personal information from Xbox One. Edward Snowden’s revealing about PRISM last summer showed that Microsoft has given the American Security Agency NSA access to real-time communications and stored information.

Now Microsoft says that the whole thing is a misunderstanding and that the data from the Kinect will only be collected if the player gives his or her permission. Microsoft does not have plans to target ads or content based on any data Kinect collects and the company will not in the future unless someone chooses to allow to do so. Even then, Microsoft would give them a clear explanation of what is collected and how it will be used.

“For example, just as Xbox SmartGlass allows companion mobile experiences that are synchronous to what is being watched on TV, advertisers could create new experiences unifying their content across devices,” Microsoft told All Things D.

“We have a long-standing commitment to your privacy and will not target ads to you based on any data Kinect collects unless you choose to allow us to do so.”

Every company aims to earn money. And Microsoft like Google, derives part of its revenue from advertising. Tens of millions of people have in their living room an Xbox console and most of the time connected to the Internet. Add to that a camera that can see what is aimed said living room, and you get really exciting marketing opportunities. The data collected through Kinect is stored on the Microsoft Windows Azure platform for three months. It is then removed. During these three months, the data will be stored for analysis. The data being analyzed will be anonymized before being used.

Microsoft was using its new advertising technology known as “natural user interface ads” (NUads) to turn the Xbox Live dashboard into a freemium service like Gmail or Facebook. Ross Honey, responsible for Microsoft advertising, said in January that Microsoft would invest more in this type of advertising in the future.

In the end, some people at Microsoft evoked some possibilities, but the idea now seems set aside not to be exploited for the moment. What is certain is that this is an interesting potential for advertisers, and we would not be surprised to see such things on our screens in the coming years.