Graphics chipmakers are fond of making a case these days that their graphics processing units (GPUs) are becoming as important or more so than the central processing units (CPUs) of the PC microprocessor makers.

As bigger displays in high-definition dazzle consumers, most of the horsepower that drives them comes from the GPU.

Fourth-quarter numbers for the graphics market will begin to leak out after the market closes today. Ashok Kumar, CRT Capital analyst, expects Silicon Valley’s Nvidia to pick up a point or two of market share, to the detriment of its rival, Advanced Micro Devices (incorporating the Canadian graphics chipmaker ATI).

He says 2007 was a memorable year for graphics, with the release of richer interfaces in the Windows Vista and Apple Leopard operating systems, a series of new graphics-intensive PC games, the new DX10 graphics standard from Microsoft and a complete refresh of Nvidia and AMD’s line-ups.

Nvidia released its next-generation graphics chips and cards ahead of AMD, gaining market share.

“AMD had their low point pretty much the middle of last year,” says Dean McCarron of Mercury Research, who releases the fourth-quarter figures today.

He says they recovered in the third quarter as new products were released and describes the latest versions launched over the past week as “process-shrinks essentially” that offer improved performance and have reduced costs.

The ATI Radeon HD 3450, 3650 and 3870X2 boards are based on chips with circuit widths of 55 billionths of a metre, compared to 80 billionths in the previous generation. This allows a smaller die size, greater transistor density and lower costs.

The 3450 and 3650, available this month, are low-power sub-$150 boards, while the 3870X2, announced today, features two GPUs and, at $450, is being priced around $150 below Nvidia’s competing card.

Multi-GPU boards are likely to become a trend, as are hybrid graphics.

The graphics capabilities of low-cost PCs can easily be upgraded by adding a new board. But, in the past, this has meant switching off the integrated graphics chip already included on the motherboard.

With hybrid graphics, the integrated chip stays on and is boosted by the addition of the board. AMD says it is introducing this feature with its new boards, Nvidia says it already has the capability.

The growing interest of traditional video game publishers in casual games looks like creating new hybrid formats and experimental business models.

Electronic Arts has announced its first completely free title, Battlefield Heroes, available for download this summer.

It looks like a dumbed-down cartoon-like version of its Battlefield 1942 PC game, but still seems far more sophisticated than a typical casual game such as Texas Hold ‘Em or Bejeweled.

There will also be elements of the MMORPG (massively multiplayer online role-playing game) genre, dominated by World of Warcraft. EA says players will be able to build their characters in an ever-expanding online world, paying a few dollars in micro-transactions for extra weapons and equipment. In-game advertising is also planned.

The success of Microsoft’s Xbox Live service has revealed there is money to be made from smaller-scale games, available for download there for less than $10.

EA is reinventing and repurposing an existing fading franchise. If it is successful, expect to see more of EA’s original IP appearing in a casualised form, aimed at less-than-hard-core gamers.

Touch-typing took on a new meaning for me this year as I struggled to hit the right letters with my fingers on the touch-sensitive iPhone.

What was more satisfying was the multi-touch capabilities the iPhone introduced – expanding the size of a photo by the spreading of fingers, stroking through a music collection in Cover Flow mode.

Touch has been a major trend of 2007, from the iPod touch and iPhone and their imitators to Microsoft’s coffee-table Surface PC.

Balda, a German company, was a major beneficiary of the iPhone’s popularity, with its glass screen, whose software can detect several fingers at once, being adopted by Apple.

Synaptics, a Silicon Valley company, has also got in on the act – its touch technology is now in more than 25 phones.

“In devices which give you the maximum visual information and where there’s no room for keyboards, the touch screen becomes your user interface,” Francis Lee, Synaptics chief executive, told me.

Synaptics is better known for its touch pads that replace a mouse in notebook PCs. I rarely click anything on my notebook these days, using “tap zones” on the touch pads to replace a mouse left- or right-click and stroking the pad to scroll through pages or zoom in or out.

Global revenues for touch-screen technologies will nearly double from 2006 to 2012, rising from $2.4bn to $4.4bn, according to the iSuppli research firm.

It lists eight leading technologies – resistive, surface capacitive, projected capacitive, infrared, surface acoustic wave, optical, bending wave and active digitizer – and eight emerging ones - photo sensor in pixel, polymer waveguide, distributed light, strain gauge, multi-touch, dual-force touch, laser-point activated touch and 3D touch.

Resistive products are currently the cheapest and most common types of touch screen and revenues should increase at a compound annual growth rate of 3.1 per cent to 2012, says iSuppli. In contrast, multi-touch revenues, helped by the iPhone and expected adoption by handheld game consoles and map browsing systems, are expected to grow at a rate of 31 per cent.

Imagine playing Halo 3 with a lot more at stake than losing a virtual life. What if, every time you were injured by an opponent, your bank account took a hit as well?

That’s the idea behind Kwari, a "first-person shooter skill-based cash-for-kills" online game, set to debut in the New Year.

Players of Kwari will suffer automatic deductions from their bank accounts when they are hit in a game, as well as deposits when they strike their opponents. The amounts can be anything from one cent to one dollar per hit depending on the stakes for the game.

There is also a fractional cost if they pick up additional weapons or health packs, with the money being pooled into a jackpot.

In 16 to 64 player match-ups, jackpots are shared between the gamer in possession of a smoking sphere called the Pill at the end of the game and the player who had held it the longest.

Kwari is the idea of Eddie Gill, a former games producer for Activision and Konami, and the company of around 20 employees is based in London.

It is a more sophisticated take on cash-for-gaming than winner-takes-all services such as Tournament.com, which went offline last month, and SkillGround.

"We have engineered the game around the exchange of cash from the ground up," says Clive Hibberd, chief executive.

He says the challenge has been to record the millions of mini-transactions in the game in a huge database and carry out double-entry book-keeping as money is transferred.

Kwari will be released in Europe first, due to uncertainty about how it will be viewed by the authorities in the US, where internet gambling is banned. Kwari argues it should be classified as a skill-based game as opposed to gambling, where luck is more involved.

Kwari will make money by selling ammunition to players. Mr Hibberd anticipates 5,000 bullets costing $5 and lasting a player for one or two hours.

Hard-core gamers are the target audience and 12,000 have signed up for a closed beta of the game.

"There’ll be weekly, monthly and annual jackpot prizes and we expect to have our first gamer millionaire by 2009," says Mr Hibberd.

Chess and Scrabulous are perhaps the most popular games being fought through Facebook profiles, but more sophisticated contests and environments are now beginning to appear on social networking sites.

At Bebo’s launch of its Open Application Platform last week, an executive from Gaia Online showed how users could step with their avatars into its virtual world from within Bebo to dance in a night club or chat with friends in many other virtual urban environments.

Now PlayFirst has partnered with widget supplier RockYou to distribute its Wedding Dash game on social networks.

“We’re looking to grab a new audience and extend our brand footprint into social networks,” says Heidi Perry, head of marketing, on the move.

Wedding Dash, a wedding planning contest, has evolved from the San Francisco casual game company’s Diner Dash franchise, which has recorded more than 200m downloads.

Diner Dash has also been benefiting from add-ons to its game, with more than 35 per cent of PlayFirst’s transactions coming from the sale of virtual goods. Players have been paying to dress their waiters, acquire new themed restaurants and accessorise them.

PlayFirst also announced $16.5m in third-round VC funding this week, led by DCM and including original investors Mayfield Fund, Trinity Ventures and Rustic Canyon Partners. PlayFirst raised $10m in its first two rounds.

DCM seems to have been attracted by PlayFirst’s expansion into virtual goods: “The company’s initial success with microtransactions this year has demonstrated that PlayFirst is among the smartest, savviest and most visionary companies in casual games,” said DCM partner Peter Moran.

Has Google’s OpenSocial arrived too late to stop social networking sites joining the stampede of developers to Facebook’s platform?

Bebo, number one in the UK, Ireland and New Zealand and the number three social networking site in the US, says its Open Application Platform is a straight use of Facebook’s application programming interfaces, the advantage being that, with the minimum of effort, developers of thousands of applications for Facebook could now make them available on Bebo as well.

In an entry on its developer wiki, Facebook announced the next step in the opening up of its platform, which began in May when outside developers were allowed to introduce applications to its service.

“Facebook is now making its platform architecture available as a model for other social sites,” it said.

Michael Birch, chief executive of Bebo, said at the launch of the Open Application Platform that he still supported Google’s OpenSocial initiative for a shared platform architecture for social networking sites, announced last month. But he had also been talking to Facebook and his developers had been focused on making Bebo Facebook-compatible.

He insisted Bebo would get round to adopting OpenSocial, but it seems Facebook’s first-mover advantage has created a critical mass of support from developers that could diminish Google’s efforts.

Facebook is giving away a major advantage in allowing its rivals to mirror its arsenal of applications. This suggests it is both confident of its leadership in innovation and worried about the threat of Google amassing an axis of opposing social networking forces.

MySpace seems firmly in the Google camp, basing its new open platform, due in the New Year, on OpenSocial. But it will be interesting to see whether the smaller players review their commitment to OpenSocial now that Facebook has responded with this giveaway.

For users, the benefits of the new interoperability between Bebo and Facebook include them being able to interact and play with one another.

Bunchball announced its Games and Avatars application, allowing Bebo and Facebook members to play a range of games with one another, while Webs.com said its popular WarBook game would be available to play across the two networks.

While 3D is being adopted by the movie industry as the technology that will put more bums on cinema seats, a new 3D camera being unveiled this week is designed to get people out of their chairs.

The ZCam, developed by the Israeli company 3DV Systems, represents a big advance on the motion-sensing technology currently being used to play video games by gestures rather than punching a controller.

Its array of sensors sends out infra-red pulses to bounce back off objects or a face, sending back information on their distance from the camera to an accuracy of around 5 millimetres and mapping the information to individual screen pixels.

This translates to a "heat map" kind of image where white is close, black is at a distance, while shades of grey create detailed 3D images and allow subtle movements to be picked up at 60 frames per second. Combined with a regular camera imaging chip, a user can pivot his or her face into a 3D colour profile and replace the black background with a movie of a palm-fringed beach or New York skyline, the same way TV weather presenters change their green-screen backgrounds.

3DV, which was founded 10 years ago,  sold a  few  3D cameras to broadcasters for $200,000 in its early days, to allow them to replace backgrounds. Now it expects cameras to appear for less than $100 in the second half of next year and be used as video game peripherals.

Zvika Klier, chief executive, showed me how I could fly a spitfire in a combat game and climb, dive and bank by just pushing my hands back, forward and sideways. Lifting my thumb triggered the machine gun.

Persuading publishers to write games specifically for the peripheral could prove difficult, but 3DV may benefit from a console maker adopting its technology.

Mr Klier sees video conferencing, automotive, security and robotics applications for the camera, but video gamers will benefit first from the total immersion and intuitive movements it makes possible.

3DV has more than 20 patents for its technology and backing from venture capitalists including the Valley’s Kleiner Perkins.

The Nintendo Wii continued its dominance of next-generation console sales in the first week of the US holiday shopping season.

Nintendo says it sold 350,000 of the $250 Wiis in the Thanksgiving week beginning November 18 – its biggest seven-day sales figure since that of the week it launched a year ago.

Microsoft has just reported sales of 310,000 Xbox 360s over the same period. It claimed it outsold Sony’s PlayStation 3 by two to one, citing estimates from top retailers.

Sony must have hoped for better after introducing a cut-price 40-gigabyte version of the console at $399.

It avoided issuing sales figures, but said PS3 sales in the week were up 245 per cent on the same period a year ago, when Sony suffered supply problems and a slow start to its launch.

Sony is currently running new PS3 commercials in its largest marketing effort for the console to date.

What they obviously don’t say is that the Wii is cheaper, the Xbox has a better games line-up and consumers aren’t clear about the benefits of a cheap Blu-ray player being in the PS3, when the standards war with HD-DVD has yet to be resolved.

Black Friday, the day after Thanksgiving in the US, falls this year on its earliest possible date - November 23.

The big day of store sales when retailers are supposed to go into the black for the year also signals the unofficial start of the holiday shopping season.

The latest online retail figures from the comScore research firm suggest the industry will need all those extra days of shopping – Black Friday can fall as late as the 29^th – to avoid a disappointing Christmas.

It reports retail e-commerce sales in October grew 19 per cent on last year to $9.96bn. That compares to year-to-date sales growth of 21 per cent up to the end of September.

Gian Fulgoni, comScore chairman, said October’s figures often gave a glimpse of what to expect during the holiday season:

“That online sales growth rates diminished slightly in October is not entirely unexpected, as many consumers are feeling the pinch of ballooning mortgages and gas prices, coupled with a decline in housing values. Even the rapidly growing online commerce sector appears to not be immune from these economic realities,” he said.

Apparel and accessories growing by only 5 per cent in October could be down to unseasonably warm weather, he added, and a recovery in this sector could change the picture for Christmas sales online.

There were also encouraging figures for some categories of retailers. Furniture, appliances and equipment grew 105 per cent on a year ago, while sales of the Nintendo Wii, Sony’s PlayStation 3 price cuts and the success of the game Halo saw the video game sector soar 264 per cent compared to October 2006.

The mobile gaming industry has hit a bump on its road to growth.

Revenues for publishers declined by 9 per cent in the second quarter, compared to the first, when revenues were up 11 per cent on the fourth quarter, according to the iSuppli research firm.

Its report says the pace of growth is slowing and one of the main problems for the industry is the small number of subscribers for mobile games. It suggests the demographic could be widened if games could take advantage of phones and be more networked and multiplayer.

A week ago, shares in Glu Mobile fell 33 per cent after it predicted a fourth-quarter loss of 6 to 7 cents a share, compared to Wall Street expectations of a loss of 2 cents.

It blamed slowing business in Europe where carriers were ordering fewer games as they changed the way they managed their businesses.

Analysts said the industry was suffering from growing pains. ISuppli suggests carriers are turning to the mobile video market instead, which it says holds the most upside potential of premium content categories.

Greg Ballard, Glu’s chief executive, visited us recently. He admitted the US was trailing Japan and Korea, where companies such as Namco and Sega were moving forward with multiplayer games on more sophisticated phones.

Glu was also still very dependent on carriers – 95 per cent of its games were delivered through 160 carriers. He expects downloads to shift more to the Web over the next three to five years, as well as to sideloading at retail through memory cards that handsets can now increasingly accommodate.

Glu sees itself as the most independent of the big three mobile game players in the West – Gameloft is backed by the video game publisher Ubisoft and Electronic Arts has bought Jamdat.

David Gosen, the head of mobile publisher I-play and another recent visitor, said Glu’s flotation on the Nasdaq in March has helped the profile of the industry. He believes more user-friendly handsets, all-you-can-eat data plans and big brands entering the sector will unlock the market in a big way over the next 12 to 18 months.

ISuppli’s forecasts back him up – it expects mobile gaming revenues to nearly triple by 2011, growing to $6.6bn, for a compound annual growth rate of 23 per cent.

That makes this year’s second-quarter slump seem like only a pause in a game, before the industry leaps to the next level.