I'd seen prototypes of this technology, but the demos are just awesome:
And if you look carefully, you can see a Zune in the title screen and at 2:04...wonder what that could mean?
Here's part of PM's take:
The product behind the Milan project is called the Microsoft Surface, and the company's unofficial Surface showman is Jeff Gattis. He's a clean-cut fellow who is obviously the veteran of a thousand marketing seminars. He spoke in sentences peppered with "application scenarios," "operational efficiencies" and "consumer pain points" while he took me through a few demonstrations of what the Surface can do. One of Gattis's consumer pain points is the frustrating mess of cables, drivers and protocols that people must use to link their peripheral devices to their personal computers. Surface has no cables or external USB ports for plugging in peripherals. For that matter, it has no keyboard, no mouse, no trackball — no obvious point of interaction except its screen.
Gattis took out a digital camera and placed it on the Surface. Instantly, digital pictures spilled out onto the tabletop. As Gattis touched and dragged each picture, it followed his fingers around the screen. Using two fingers, he pulled the corners of a photo and stretched it to a new size. Then, Gattis put a cellphone on the surface and dragged several photos to it — just like that, the pictures uploaded to the phone. It was like a magic trick. He was dragging and dropping virtual content to physical objects. I'm not often surprised by new technology, but I can honestly say I'd never seen anything like it.