Microsoft Kinect is a system designed to work with Microsoft's Xbox 360 game system. Not yet released, the system uses a webcam-like attachment to the console, which can interpret gestures and movements to allow a player to play a video game without use of controls. It's a bit like a Wii Remote or PlayStation Move. The system maps the player's body, even in low light, and can recognize small movements.
However, in the Kotaku article about the patent, there is skepticism about the claim of it being able to understand American Sign Language. According to Kotaku user NoSpecies, "Assuming they did add some support for this they would seriously have some problems not only with the speed of the language but also the ability to recognize words from movement no matter how obscured fingers are." The patent could be outdated compared to the eventual product or Microsoft could have plans to further refine their technology to be able to recognize the fine hand shapes and movements of Sign.
This is interesting, and definitely something to keep an eye out for. I could see a very useful American Sign Language instructional game being made from this, as well as other accessibility features that could be implemented.
Update: According to a Kotaku post today, the version of Kinect shipping this year is not as capable as originally thought, and in order to reach the $150 price point, Microsoft "dumbed down" the camera. Microsoft is quoted in the blog post saying, "We are excited about the potential of Kinect and its potential to impact gaming and entertainment. Microsoft files lots of patent applications to protect our intellectual property, not all of which are brought to market right away. Kinect that is shipping this holiday will not support sign language." Disappointing!