Well, this video
from NextGen News shows you how. This was taken from the Think Next convention and shows how Natal
views a person in the camera's FOV. It does look pretty responsive and I couldn't notice any lag when the person's moving and what's shown on the screen. Now, we don't know if it's because it's not also running many other processes for a game but for the product to succeed, it can't have any noticeable lag and so far from current reports and videos, it looks like Microsoft's got that in the bag.