The video actually uses a motion capture of a human actor to create a life-like animation. Image Metrics, whose animations were used in the Grand Theft Auto game, has developed a sure-fire way of making human faces look believable: apparently it's all about the eyes, and the little assymetries of the human face. There's a lot more fine control over the details in this new system, according to chief operating officer Mike Starkenburg:

There's always been control systems for different facial movements, but say in the past you had a dial for controlling whether an eye was open or closed, and in one frame you set the eye at 3/4 open, the next 1/2 open etc. This is like achieving that degree of control with much finer movements... For instance, you could be controlling the movement in the top 3-4mm of the right side of the smile

My question is, how long is it before we're all having video chat with slightly idealized animations of our friends? [London Times via Technovelgy]