Phil Harrison, a brilliant, Ichabod Crane-ish videogame machine designer, ushers me into an inner office at Sony Computer Entertainment America in Foster City, California, and fires up a beta-version PlayStation 2. Once the thing's on, the 29-year-old industry veteran, formerly of Mindscape, becomes half his age. "There's real refraction and reflection," he says of the eye candy that flashes on screen. "The fish underwater are realistically distorted according to the correct optical rules."

As he pilots a rubber ducky around a computer-generated tub and fires off a batch of onscreen fireworks, Harrison explains that with PlayStation 2, he and his team have hacked "motion blur" (the illusion of fluid, seamless movement) and "alfa blending" (the ability to make objects look semitransparent). He notes that everything I see is generated in real time - that is, every graphic is rendered rather than played from memory - and asks whether I am noticing how realistic everything is.

He shows me natural phenomena like fur and leaves, and then, growing even more animated, launches a program that displays birds flying in patterns based on behavioral simulation, not on predefined animation.

"They can fly for a billion years and they will never repeat the pattern," Harrison says. "The flight isn't random. It's biological behavior. The birds are maintaining spatial separation. They are maintaining rules of follow the leader. If they get lost, they maintain the rule of what happens for them to be able to rejoin the flock. They flap their wings when they need to gain height and glide to slowly descend. None of this was precomputed by an artist." Harrison says Sony has applied the same principle to growing virtual trees, but when he tries to demonstrate, nothing happens.

"I want a tree!" he calls out.

"You want a tree?" an engineer grumbles. He leaves and returns with three colleagues, who huddle over a workstation for a while. Soon, I watch on the main monitor as seedlings sprout into an instant forest.

In his Tokyo office, Harrison's boss, PlayStation mastermind Ken Kutaragi, modestly dismisses the boasts of others, including Sony chief Nobuyuki Idei, that PlayStation 2 will raise the bar for entertainment not only on game boxes but on computers as well. Idei has said that the PlayStation 2 can finally do what other videogame machine and set-top box market makers have threatened for years: provide a console that transforms your TV into a PC - and bring lots and lots of Sony content into every living room to boot. Could it really be that this time things will be different, and a game machine really will be all the computer some people want? Kutaragi, all in black - suit, shirt, tie - holds back a smile. "Yes, as far as I'm concerned," he says. "This is a machine for games that is unlike anything anyone has ever seen. The rest will come from that."

When Idei placed the legendary, flamboyant Kutaragi on his trimmed-down board of directors, several people inside Sony cautioned the boss that he was creating a monster. As Harrison says, many at Sony wonder, "Can Kutaragi-san be a responsible adult?" Idei enjoys mulling over the question. "Maybe he wouldn't fit in at the old Sony," he says, "but the new Sony is exactly the place that cherishes and celebrates the brilliant people like Kutaragi."

And no wonder. Kutaragi has been elevated to near royalty at Sony because he brought to the company a business model that is almost unparalleled. Sony has learned - from companies such as Nintendo and Sega - that if it gets you to buy its PlayStation videogame system, you will buy hundreds or even thousands of dollars' worth of its games. It's unlike any of Sony's traditional consumer-electronics products. It's as if Sony, once it sold you a VCR, was able to profit from every video you ever purchased or rented. PlayStation brought Sony into this lucrative software business and, as a result, contributed 40 percent of the company's 1998 profits.

Kutaragi's original PlayStation, a Teiyu Goto design, had phenomenal success - 60 million systems have been sold. Add to that 460 million software units sold, all of which benefit Sony either directly or because of the license fees it charges, and one can begin to comprehend the huge numbers generated by the "game" machine. Yet it wasn't only the device's profitability that inspired Idei to bring PlayStation into the central organization.

Howard Stringer, Sony America's president, has called PlayStation 2 the "Trojan horse" that will bring the Sony network home. PlayStation 2 could serve as a central node of the Sony home network - particularly if sales of the new system approach the numbers of the original PlayStation. Even at its reported high price of ¥45,000 (US$380) in Japan, it could serve as an excellent "entry system" - marketing parlance for introduction to the brand. The PlayStation 2 can be connected via modem, cable modem, or i.Link to the Net, and by i.Link and Sony's Memory Stick to other digital devices. Plus, because it uses the Memory Stick, it needn't be upgraded to function as a PC.

Of course, runners-up Nintendo and Sega have their own new systems on the horizon. Sega's Dreamcast and Nintendo's Dolphin also have much hyped bells and whistles, including 128-bit architecture and Internet connections for the Sega machine. Prior to the September release of Dreamcast, Nintendo and Sony cut the prices on their current systems to below $100, hoping to buy more time before their own new products appear. But industry analysts predict that PlayStation 2 will dominate the market when it's released.

At the heart of the PlayStation 2 is a central processor - made by Sony in association with Toshiba - poetically called the Emotion Engine, a 128-bit version of the RISC chip that powers workstations. It can move information around at 300 MHz and - along with custom-made processors for sound and video, assorted decoders, memory managers, and superspeed buses - will be the basis of a machine that, Harrison says, will outperform the most sophisticated gamer's fully loaded (and 10 times more expensive) PC. One dazzling spec: Whereas the PlayStation renders 300,000 polygons per second, the PlayStation 2 renders 16 million in that time.

"We can create digital content that is like a movie but is really a game," Kutaragi says. "It allows us not only to make the images look beautiful but also to imbue the objects of our world with the behaviors of the real world or any other version of reality you choose." He looks up and deadpans, "I think people will be impressed."