According to CVG's Nintendo HQ insider, Nintendo's president Satoru Iwata was shown the Natal technology back in 2007, and that he decided to pass on it.
 
This from CVG: 
 

Nintendo boss Satoru Iwata was offered the chance to sign up the device that became Project Natal - but turned it down as he didn't believe he could launch it at a mass-market price.

That's according to a top insider (and we mean top insider) at the platform holder's Japan HQ, who told us that Israel firm 3DV Systems showed an early demo of the technology to Iwata and other Nintendo bigwigs at the end of 2007.

Despite being impressed with the prototype, Iwata was reportedly unsold on it as a peripheral for Wii - leaving the door open for Microsoft to snap up the tech and its creator a year later.

"Iwata-san only ever invests in something he can guarantee will work for a Nintendo audience," the exec told us. 

"3DV showed off a camera that detected motion in 3D, and had voice recognition - but Iwata-San was unconvinced he could sell it at a Nintendo price point. He also had some worries around latency during gameplay."

The new information appears to confirm 3DV's involvement in the creation of Natal, which Microsoft has never certified.

"Honestly - I've heard Iwata describe the prototype he saw at length, and it's definitely Natal," added CVG's source. 

"What we witnessed at E3 was smaller and the facial [reading] stuff had improved, but it's the same technology. We remain unconvinced Natal will deliver on the more sophisticated elements of what Microsoft is promising at the price they're aiming for."

Microsoft will no doubt internally disagree with the claims. MS has dubbed Natal a'new console' in itself. The hardware is set to launch late this year, with an expected price point of around £50.

Iwata's alleged belief that the device would be too expensive fits with recent reports that Microsoft removed a chip from Natal to save on R&D costs, whilst some prominent development figures have also questioned whether Natal will have potential latency issues.
 
Nintendo's Shigeru Miyamoto has previously admitted: "This type of motion-sensing camera technology has been around for quite a while. [We've] ultimately made the decision not to take advantage of what they can do."

Unsurprisingly, both Nintendo UK and Microsoft would not offer us a comment on the "speculation". (Trust us, it ain't).

Didn't Sony also pass on it?

Nintendo doesn't need it since Wiis are still selling like hot cakes for their motion controller.

Read this yesterday. 
 
There are two thing that I do not believe in: 

1. Natal
2. Apple's iPad/Touch games

Nintendo is pretty smart for doing that. Natal has not proven itself at all.

" Nintendo is pretty smart for doing that. Natal has not proven itself at all. "

" @Cube said:

" Nintendo is pretty smart for doing that. Natal has not proven itself at all. "

 It hasn't even been released yet, how can it?.    What was seen by Iwata back in 2007 may well have come on a long way since then, what with the rapid advances in technology in this area, and the cost of components dropping in the years that have passed.   "

" @Linkyshinks said:

" @Cube said:

" Nintendo is pretty smart for doing that. Natal has not proven itself at all. "

 It hasn't even been released yet, how can it?.    What was seen by Iwata back in 2007 may well have come on a long way since then, what with the rapid advances in technology in this area, and the cost of components dropping in the years that have passed.   "

Uh, by showing a live tech demo, similar to The PS Arc? Showing how it can be applied to certain genres?  Yeah, kind of like that. "

Nintendo always says this. What was the quote from Miyamoto? "I could have made Halo" back when it was selling however many million copies? I'm pretty sure there are plenty of good developers that could have made Wii Sports too but you don't see them talking.
 
My question is: Who cares? The only thing they even seem to be saying in the article is that it was "too expensive" for their "vision."

"Read this yesterday. 
 
There are two thing that I do not believe in: 

1. Natal
2. Apple's iPad/Touch games

Why? Because they don't have any buttons. You need buttons. Games themselves need buttons. So far, everything I have seen on the iPhone has been dull. Nothing really catches your eye. The "games" so far seem like nothing but time wasters. Nothing on there is a real "traditional" game. With no buttons, you can't get precise controls. So far everything that they're selling is an artsy app or flash game you've played countless times. The only really interesting game they've had on there thus far is Chinatown Wars, which is just a port of a DS/PSP game.

 Same with Natal. I havn't seen anything for it but the tech demos. And the tech demos so far are also dull. Natal is destined to fail unless Microsoft can get more traditional games to actually support it. Halo won't work on Natal. Banjo won't work on Natal. MAYBE an RTS. MAYBE and RPG, but nothing else. I feel like Natal will end up like the EyeToy, and currently the PlayStation Eye.  but that's just me... "

If I could play that Don't Shit Your Pants game with this, that would be awesome.

Natal is pretty stupid. Sony made the smarter call just copying the Wiimote.

They don't need it. That's why.