I know everyone has already linked to this, but it's so cool I wanted to make sure everyone saw it. Some guys at the University of Toronto have built a cool desktop UI prototype based on more physical, real-world interaction.

I have lots of reservations about how useful it would be as is. There are a lot of risks and pitfalls building user interfaces that too literally mimic real world metaphors. The limitations of the computer interaction model prevent the metaphors from really feeling the way users might expect; it's also silly to not take advantage of the properties of the computer to advantage the user and reduce some of the problems in the real world (note, the BumpTop stuff does actually do a reasonable job of this.)

Still, there are lots of neat ideas here, and I can't deny the beauty and fun factor this prototype demonstrate (very important too). Judge for yourself. (BTW, it's cool to see TabletPCs getting used this way.)

BumpTop Prototype