Xbox definitely has the upper hand on controller-free gaming. And they are kicking it up a notch even further with the introduction of Kinect Fun Labs.

I have to admit, as I was watching this presentation unfold, I was afraid it was gonna be another gimmick addition… well it sort of is, but it’s still pretty sweet.

There were three features introduced as main components to the Kinect Fun Labs.

The first was People Scanning. Basically, this allows the player to create an exact avatar of yourself, without having to sort through all the options to find “you”. The Kinect has the ability to scan even the finer features of your face, like the hair, eyes, and nose. The demonstration were pretty impressive.

The second features is the Kinect finger tracking. It basically follows your finger movements and allows you to draw on a picture, say of you, that the Kinect has scanned. So you can draw, big freakin’ deal… right? What makes this feature cool is that by moving your hands away and towards the Kinect, you can actually draw around your picture. Yes, you can draw in 3D! Of course, the picture can be viewed from different angles. All of these can be share via kinectshare.com. I thought this was pretty cool.

Finally, the last feature is Ocject Scanning. It’s pretty much the same as people scanning, except you can scan anything. You can scan your favorite object, whether it be a car, a stuffed animal, or better yet, an action figure! You scan the front and back, and presto! You have now a virtual copy of your object to control! Imagine being able to scan your favorite Star Wars/Power Ranger/Superhero action figure and being able to control it in a game! Sweet.

Kinect Fun Labs goes live today, with Xbox LIVE.