In this demo from CES, an Intel rep shows us the coolest thing to happen to Lego toys since tiny rubber wheels.

What you'll see in this video is a blurring of the line between real and virtual toys, as digital enhancements change the way we might play with Legos.

Research scientists at Intel's lab in Seattle have figured out how to use 3-D image recognition software to create new, virtual play spaces and actions for physical Lego toys, as well as physical gestures. You can set a Lego house on "fire" with a Lego dragon, or you can watch tiny passengers board a Lego train for its journey around a virtual track.

We're sure this type of image and gestural recognition would work with non-Lego toys as well; toy franchises from My Little Pony to G.I. Joe could benefit hugely from these kinds of enhancements.

But for now, these toys are still very much in research stages. Intel built and runs the programs on Gentoo (a Linux distro) with an Intel Core i7 processor.

Check out the video below and let us know what you think. Is this a cool new way to play — something that might soon make its way to a mass market? Or do you think that toys like these might erode what's left of our youngsters' imaginations?