Okay here's the NON tin-foil-hat version of what COULD ACTUALLY happen.
Kinnect could anonymously (e.g. without ever sending any video or photo footage) your estimated age and gender, and target ads on netflix accordingly. Google already do this via other methods of gather your info.
As this wouldn't actually involve anyone ever seeing your kinect cam, it MIGHT be legal.
They may also use it for some form of DRM. e.g. a game is licensed to a person, not a console. This has ups and downs, it would mean you could play all your games on other people's consoles, but it would also destroy the used game market (not that I care, but most do)
OPTIONAL - OPT IN (perhaps paid) use of kinnect's footage for advertising purposes. The information a kinnect cam could offer advertisers is too good to pass up. If it's already in every living room, all they need is your permission, so I image we'll see advertising agencies at least try some form of opt in, paid agreement for them to be able to view your kinnect footage as you watch TV, play games, view ads. Absolutely priceless information for advertisers. This would likely be annonymouse, in that footage would come back with something like a silhouetted rendering so all you could see is the people, where they are sitting, what their eyes are looking at (very easy and possible with kinnect) - all the information they NEED without anything they don't.
Who knows what it will be used for, but what ever it is, it will be eased in. M$ Cannot risk the launch of their console by over-stepping the public's limits in regards to privacy (perceived or real privacy). Accordingly I expect little to no 'invasive' features at release, however there's too much money in the advertising idea alone for this discussion to not already have been had @ M$'s xbox department.
This post was edited by IIFOXII on May 26 2013 01:05am