Betting multi touch screen technology will be a common way to interact in years to come, Microsoft (MSFT) is showing off a prototype of a 4-by-6-foot digital whiteboard that reacts to the human touch.

During the Redmond, Washington technology giant’s CEO summit earlier this month, Chairman Bill Gates took to the stage to demonstrate the technology, saying that “all the surfaces, horizontal surfaces, vertical surfaces, will eventually have an inexpensive screen display capability and software that sees what you’re doing.”

Microsoft thinks these interactive surfaces can take the form of a whiteboard, desk, or table, and react to touch similar to the popular feature on Apple’s (AAPL) iPhone.

Last year, Microsoft showcased the technology, unveiling its Microsoft Surface prototype, which is a flat table that has a Windows-based computer with a small camera tilted upward. Whenever the surface was touched the software would understand and respond. Microsoft shipped its first unit in recent months, with AT&T (T) incorporating it into its phone stores. In that case, AT&T customers put their phone down on the surface and the software recognizes the phone and gets suggestions for calling plans and different models. 

“The reception has been phenomenal,’’ said Gates of Microsoft Surface during his speech. A transcript of the speech was posted on Microsoft’s Web site. “This idea that you just sit there and interact, touch, you don’t have to learn anything, that naturalness really draws people in.”

Touch screen technology has been around for years, but the popularity of the iPhone and the ability to use your fingers to zoom in and zoom out has taken hold with consumers. Tablet PCs have touch screen technology and there are even expectations the technology will find its way into flat panel televisions.

“The technology is coming, the question is how broad it will be,’’ said Robert Enderle, founder of technology market research company Enderle Group. “It will likely be in TVs at some future point and lends itself to presentations.” He said there’s even a Youtube.com video showing what an Apple iMac would look like if the company incorporated touch screen technology into its next generation of iMacs.

“It may very well be how we interact in future versions of Windows,’’ noted Enderle.

Indeed, during Gate’s presentation, he said the company’s Windows group is building software code for multi touch at the operating system level. “Any piece of Windows software will be able to have this type of interaction,” said Gates during his presentation.

To demonstrate the Touch Wall, researchers in Microsoft’s Office Labs used a sheet of high quality plexiglass, a projector mounted behind the plexiglass and an infrared camera. An infrared laser that has a diffusing lens spreads the infrared beams out like a big flashlight, creating infrared light just above the surface of the plexiglass.  Any time a finger or object approached the screen the camera would feed the digital image into the computer which thanks to software code would interpret it to do things like zoom in or tap to change pages.  The technology is still in the prototype stage and Microsoft has no time frame as to if and when a commercial product would be on the market. Enderle thinks Microsoft will build design references and then license out its technology including the software.

While there are multi-touch screens on the market that have sensors built into the screen itself, Chris Pratley, general manager of Microsoft’s  Office Labs, said they could be costly. What’s more, he said by using a camera, there’s more flexibility in what you can do in terms of interaction. With the camera technology you can place objects against flat surfaces and even have different objects mean different colors or shapes, said Pratley.

Microsoft sees the Touch Wall as an ideal tool for corporations that want to use it for interactive presentations but it usage doesn’t stop there.

“Its targeted everywhere you use a whiteboard or chalk board,’’ said Pratley. “Instead of having a static display that you write with marker and have to erase it will be an interactive display. The sky’s the limit."