Microsoft working on Virtual Headphones system

Making this work is existing technology known as beamforming, combined with sound localization using a camera or specialized microphone array. Mix that hardware up with a fancy software algorithm, and audio will be able to follow the listener around the room without disturbing others. Is this even possible, and if so, won't it be prohibitively expensive?

Microsoft aims to create that software algorithm, working with cheap speaker arrays such as its prototype pictured here, positioned in or around computer monitors. While the company admits the technology may be three years from actually working, if it ever does, it's hoping to include this audio beamforming algorithm in every copy of Windows Media Player.