A recently filed patent application describes the concept of a 3D stylus.

Essentially a translation of the 3D mouse that has been available for more than a decade, Microsoft's 3D stylus is based on a device that is capable of recognizing one or more magnetic fields that is created by a set of transmitting coils integrated in a display device. The magnetic field information is translated, sent to the display over an RF channel and the position and direction of the stylus is determined accordingly.

Microsoft does not provide example applications of the technology, which are critical for the success of a data input model. Conceivably, the technology could beneficial in business applications such as collaborative environments and during presentations where an applications could be controlled while the presenter is away from the screen. For a mass market 3D input model, however, Kinect may have a much greater opportunity for wide-spread adoption.