Following Microsoft's announcement of Project Natal, the technology that lets players control and interact with the Xbox 360 through gestures, facial recognition, spoken commands, and without the need to touch any controller, Nintendo has revealed it also tried video-based motion sensing; and flat-out rejected it.
Nintendo President Satoru Iwata told the Financial Times that his company made experimental games controlled by camera-based sensors, but supposedly got better results with the accelerometers it eventually chose to use for the Wii. We have no doubt that five years ago when the Wii was being developed camera technology such as the kind used in "project natal" was nowhere near as advanced as it is now.
[SOURCE]
