Eurogamer: Can you draw a nob? Because most people, given the opportunity to draw something, will draw a nob.
Peter Molyneux: That's the interesting thing, you see. We've been very, very clever about this. Although you can put stuff in his world, you'll notice he never shows you the stuff. So although you could do obscene stuff, he'll just look at it and he won't understand it. He won't pin that picture up on the wall, because I'm fully aware people will do things like that.
Eurogamer: Can you explain more about the pocket money system and how that works?
Peter Molyneux: You can buy stuff for Milo's world, like a bicycle or a trampoline. He'll come back from school one day and say, 'Oh, Alex' - Alex is this character at school who always does a bit better than Milo - 'Alex has got a new bike. When can we get a new bike?'
To get that bike you need to earn money by doing activities. There are three activities you can do, and the amount of time you spend on each activity sculpts your Milo in different ways - so everybody's Milo will be completely unique to them.
If you do lots of work, your Milo will be very studious. His hair will have a side parting. He'll be quite worried about his appearance and he won't like to get dirty. Whereas if you do more of the play stuff with Milo, he'll be more of a kid who goes out and scratches his knees.
Your character doesn't have to be a boy, it can be a girl. At the start you can choose whether to be play as Milly or Milo.
Eurogamer: One of my colleagues did want me to ask why you made him a 12 year-old boy, and not a nubile 17 year-old lady acrobat?
Peter Molyneux: If we were making a porn game, I probably would do that. He's not 12, he's about 10, and that's before he's hit puberty. Part of the amazing impact of this is he can remind you of your childhood.
Eurogamer: My colleague pointed out that if it was a 17 year-old acrobat, instead of things like 'Have you done your homework?' you could say, 'Will you take your bra off?'
Peter Molyneux: Yeah, you could do. You could make a great porn game with this stuff, that's absolutely for sure. But I'd love the idea that you've got this character who you are inspiring. It is such a wonderful feeling that to inspire anything, whether it's a dog or a person or a kid. When you see and feel that emotion, it's pretty emotional.
Eurogamer: You said he only understands certain words. So presumably you can't have a conversation about the situation in Palestine?
Peter Molyneux: The number of words he understands is built up over time. For Claire [the lady who demoed a conversation with Milo during Microsoft's conference], it's something like 500 words.
But we haven't cracked the real problem, which is him understanding the meaning of it all. He'll give you the illusion he does that. The interesting thing is you can only talk to him when the Talk icon appears at the bottom of the screen. That's when he's listening to you; the rest of the time, he's not. He's listening to you because there's a context in which you can talk to him.
One of the journalists who came in before you had obviously read up on the Turing test. He asked Milo one of the questions in the test - 'Do you remember when we met yesterday?' Well, of course, we haven't cracked the Turing test. If we had, then applying it to a computer game would be the last of the solutions we'd use it for.
Eurogamer: Looks like my time's up, so briefly: are you going to change your name to Gepetto Molyneux?
Peter Molyneux: As in Pinocchio? I could do, I suppose. I have to tell you, it is amazing. You do feel, in a way, that you are creating something that has never existed before. When you show it to people, especially non-gamers, it does promote this incredible emotional reaction.
Eurogamer: I was nearly in tears during the E3 conference. But that was partly because I am a girl and I have jetlag and the internet wouldn't work properly for the Live Text. But yes, I was nearly in tears. I didn't want Shane Kim to see me cry though.
Peter Molyneux: We have had people in tears, because there are times when this is quite an emotional journey. It's very different. It's very ambitious. But we're going for it.
Milo and Kate has no current release date, and nor does Project Natal. Check out the b-roll on Eurogamer TV.