Avatar Kinect is the new application that allows users to control the movement of their Avatar using Kinect’s camera functionality. Avatar Kinect is a free download that is available through Kinect Fun Labs.

Using Avatar Kinect, Xbox Live Gold users will be able to chat with their friends using their Avatar in addition to taking screen shots and videos that can be shared with others using Facebook or KinectShare.com.

Microsoft will also be bringing another Kinect offering for download on July 28th called Kinect Sparkler. This application allows what can be best described as 3D finger painting by using Kinect. Sparkler will also be part of Kinect Fun Labs, but this application will cost 240 Microsoft Points, or $3 to purchase.

To celebrate the release of Avatar Kinect and Kinect Sparkler, Microsoft is having an Avatar Kinect Stand-up Comedy fest that will highlight 90 second clips of Avatars controlled by professional comedians. This will arrive starting July 28th.