This week Microsoft has presented a concept for a system they call IllumiRoom, one made to show how the television could be expanded upon with a series of projectors. This system has been pegged for possible integration for the Xbox 720 - also known as the Xbox Infinity - a system Microsoft will announce in one form or another on the 21st of May at Microsoft's Xbox campus. With Microsoft's IllumiRoom, gamers will be using a combination of the Xbox's Kinect sensor and a projector to bring a room-wide peripheral view experience enhancement to the Xbox 720.
This system has not been confirmed as being prepared for the release of Microsoft's next-generation console, nor has it been presented as anything but a proof-of-concept thus far. Because it's expected that the next-generation Xbox will not be released in final physical form for at least another half-year, it does remain possible that IllumiRoom will be integrated when the time comes.
It's important to note that the Xbox Kinect originally started as a project similar to this one, presented first as a proof-of-concept like you're seeing here. As the system proved to be more than just a mere fascination for users and developers alike, Kinect became an integrated system for the Xbox 360 - still something you'd purchase separate from the system, but marketed as an essential element.
“Ideally, IllumiRoom would be directly integrated into a next generation console and new games would be designed for IllumiRoom from the ground up. We envision an API that enables triggering illusions, changing surface appearance, controlling room lighting, inserting objects into the physical environment, etc.” - Microsoft Research
At the moment, this system requires more than one projector and is made to enhance only games that are optimized for it. You'll see situations that range from an object jumping out of the screen to bounce across the floor towards the user to virtual reality snow falling around the user as they drive a car through some wintery mountains. If the Xbox does adopt this system when its next-generation launches, it could be a separate element that takes on the title "Xbox Infinity" while the Xbox itself summons the iPad naming convention, existing as "Xbox" from here on out.