I was watching the conference live, and I had the same reaction: "There's no way this actually works." Then they brought out a lady who did a live demo with it... I can't find that video right now, but it was very similar to this: http://www.youtube.com/watch?v=L3vWzzoLHrM

Notice how you can clearly see the on-screen body mapping to the person's body. Between that and the fact that I doubt they would make such a big announcement if it didn't already work fairly well, I'm now on the "this probably works" side.