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"It is not always watching or always listening," a rep for Microsoft told me over e-mail while I was trying to nail down some facts for a story about next-gen consoles that ran in yesterday's New York Times.
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"Yes, you can turn the system completely off," the Microsoft rep said. "This would use no power and turn everything off. We’ll share more details about how it all works later." I believe this powering off involves the aforementioned power button.
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Microsoft is now seeking to calm concerns that the new Kinect might spy. "We are designing the new Kinect with simple, easy methods to customize privacy settings, provide clear notifications and meaningful privacy choices for how data will be used, stored and shared," the Microsoft rep told me.
"We know our customers want and expect strong privacy protections to be built into our products, devices and services, and for companies to be responsible stewards of their data. Microsoft has more than ten years of experience making privacy a top priority. Kinect for Xbox 360 was designed and built with strong privacy protections in place and the new Kinect will continue this commitment. We’ll share more details later."