According to reports, Lionhead Studios 'Project Milo' for Microsoft's upcoming Kinect peripheral has been canceled and some 19 staff members have been laid off from the developer. The innovative game (or at least an impressive working tech demo) was first shown at E3 2009 where many were floored by the lifelike interaction between the titular character and a Lionhead staffer. While it's clear that development on the project had obviously gone on after that showing, what's unclear is why such a high profile potential killer app was killed off before updated information or perhaps some sort of commercial demo could have been released.
No official completion or release date were ever announced for the project. Nevertheless the game was supposed to be a key future title in Microsoft's growing Kinect lineup. In fact, after the 2009 E3 showing, it was easy to poke around a few too many message boards and find many gamers interested in Kinect precisely for Milo. News reports state that Lionhead may end up using elements of the project in its upcoming RPG sequel, Fable III, but we'll have to wait for updated info on this before speculating any further.