A new gadget has snuck its way onto Kinect Fun Labs. Mutation Station will let you and a friend use the "mutator ray" to transform into a variety of crazy shapes. Give yourself two heads, or pose as a beefed up bodybuilder and then take a snapshot and share it online via Kinect Share.
You may have seen similar programs available for PC webcams. Naturally Kinect's advantage is its body tracking, allowing the software to warp just the people, with specific effects for specific body parts, leaving the rest of the room looking normal.
Mutation Station can be downloaded from Xbox Live here for 240 Microsoft Points.