How does Kinect work?

Solution 1:

Kinect is based on the hardware, and possibly software, of PrimeSense. They use a flashing IR light-source and a filtered camera to measure time-in-flight and compute a depth map from that. Presumably, objects that are near-field and/or moving are detected as people, while static and far-away stuff is treated as background.

In contrast, the Wiimote has an IR camera and accelerometers built into it. The sensor bar that you put on/near your TV contains a pair of IR LEDs. The hardware in the Wiimote tracks those LEDs and determines which way it's pointing based on their position.

Solution 2:

Kinect is very different from the Nintendo Wii.

The Nintendo Wii requires you to be holding WiiMotes and only cares where the WiiMotes are and what they are doing.

Instead, Kinect tracks your body in 3 dimensions and tries to do 1:1 replication of your movements. So if you jump, Kinect will see it and make your character jump on the screen.

Kinect also has built in headset-free chat, so you can talk to the game/other players freely.