Microsoft held their own press conference during Gamescom to counter Sony’s big announcements. Peter Molyneux, boss over at Lionhead Studios, took the stage and revealed something great. According to him, the UK based company is already underway developing Fable III for the Xbox 360. Molyneux promises the third installment will be about choice, and the consequences that surround each one made

He went on to tease the audience that there is something wrong with RPGs today and its been an issue ever since the very first title was released in the popular genre. From the sounds of it, he wants to forever change that problem, however, he did not specify exactly what he meant.

After the jump, check out more details about Fable III.

A trailer was shown during the event, which we hope to have soon. However, reports have started to leak that the main character you control and create will be the king or queen of Albion, the land of the game. According to Molyneux, he wants the players of Fable III to feel like they have power and control — so what better way to do this, than to be a king?

Not only will you build the reputation of your character by interacting with non-playable characters, but the game will have a ‘Sim City’ vibe to it. An example he gave is having the ability to raise or lower taxes to the citizens. As you progress in the game, you can actually set standards of taxes in different regions. For instances, if one area is wealthy, while another area is poor — you can raise the taxes in the region that has enough money to help the needy parts.

Just like every great leader, there will be a king or queen by your side — who will try and push you to make decisions. How he or she will do this, or if there will be some kind of reward system to listen to your partner, is not yet known at the present time.

Molyneux said there will be an actual political campaign element to the RPG. During the game, you will make decisions and promises to the public. As the game progresses, you’ll have to sacrifice some of these so-called promises. It’ll be the your goal to convince the public that you had to cut-loose some of these pledges you once made. If you do it correctly, the public will still be on your side.

As the games moves forward, you’ll notice a lot of injustices throughout the land, however, you might not be able to fix each and every one of them because it could hurt other areas of the country. It’s up to you to decided if helping one cause is worth sacrificing other problems in the land. From the sounds of it, prioritizing world issues will be a big part of Fable III.

Another cool feature in the game is called the “Judgment System.” A non-playable character will come before you during what sounds like a trail. He or she will tell you their side of the story and try to prove their innocence, it’s up to you to investigate and see if their telling the truth or not. When you make your decision, you’ll find them guilty or innocent. While it’s not a big part of the game and it only sounds like ’side-missions,’ it certainly sounds fun.

Fable III has another new mechanic called ‘touch.’ The touch system is way for the players to interact with people around them, by simply using parts of their body. Molyneux gave an example of trying to hook up with a woman. The ‘touch’ system’ will allow a player to shake the woman’s hand to introduce themselves. The handshake can later turn into a hug, which can then morph into a kiss, and eventually into something a little X-rated. Molyneux went on to say that the touch mechanic is one of many features which is new.

Overall it sounds like Fable III is headed into the right direction and is not some updated version of Fable II. From what Peter Molyneux is saying, this will be much more different and deeper than the first two in the series. And in my opinion, that’s saying a lot.

Fable III sounds like it will be out sometime next year for the Xbox 360.