IllumiRoom is a new proof-of-concept Microsoft Research project designed to push the boundary of living room entertainment by blending virtual and physical worlds with projected visualizations.
IllumiRoom uses a Kinect for Windows camera and a projector to blur the lines between on-screen content and the environment. The effects in the video are rendered in real time and are captured live, with no special effects added in post processing.
IllumiRoom project is demoed in the video below. It is interesting to see that Microsoft has used FOSS games, including Red Eclipse and SuperTuxKart. Probably they needed source code to make the project happen.