During a keynote speech at this year’s Consumer Electronics Show (CES) in Las Vegas, Microsoft unveiled plans to release a technology called Avatar Kinect, a new way for Xbox 360 Kinect owners to interact with other users online with their Xbox Avatars.

Avatar Kinect uses the motion-sensing, facial and voice recognition capabilities of Kinect to allow your Xbox Avatar to mimic any facial expressions, mouth movements and body gestures you make in front of the device – as you speak, wiggle your eyebrows and gesture with your hands, your Xbox Avatar will faithfully recreate your movements.

This functionality will initially be used in visual online chatrooms, where you’ll be able to speak with your friends using your Avatars, while current social features available on Xbox LIVE (and accessible to Xbox LIVE Gold members) will also make use of Avatar Kinect.

Furthermore, you’ll be able to record your own Avatar movements, actions and speech, which can then be shared online. From a press release:

“With Avatar Kinect, a player can invite up to seven friends to join them in one of 15 imaginative virtual environments. One of those worlds is a performance stage, where friends can record their performance and share with friends.”

Avatar Kinect is scheduled to launch in mid-2011, and will be available for free to Xbox LIVE Gold members. You can watch a neat demonstration video of the technology below:

Avatar Kinect Demonstration and Trailer