A user at the NeoGAF forums claims to have overheard a conversation from a Kinect team at a restaurant it Las Vegas. The team are said to have "finally" got object scanning working. "Hold up this salt shaker and it's scanned into the game", was an example given. Object scanning was a feature first shown at Kinect's unveiling as Project Natal at E3 2009, and it has yet to be utilized in a game.
The second feature involved scanning your own face in to make an avatar. It is unclear whether this will result in a standard 360 avatar based on your looks, similar to Mii creation on the Nintendo 3DS, or some other game-specific character. The current results are said to be "bumpy".
Lastly, and perhaps most interesting, is the notion of interactive books and learning software. This seems to have taken up the bulk of the discussion and involved children reading through stories, with the story playing out around them on screen as they progress through it. They can interact with it and sound out a word by stopping and walking across a word or sentence which will be "flying all around the children". They described it as "very magical".
You may want to take this rumor with a pinch of salt given the source, but it's certainly very interesting and none of it sounds too infeasible. It's unclear what kind of team might be working on such features; whether this is all part of one or several game projects, or a more broad technology feature that Microsoft is planning on implementing -- avatar scanning and object recognition API's for any Kinect game, and possibly a book store in the Kinect Hub like those found on the iPad and Kindle devices.
Whether true or not, we can expect to see some exciting Kinect announcements at E3 this June. Perhaps these features may be announced. We'll make sure to keep you up to date with the latest news and announcements.