Windows Phone 7 entered a crowded smartphone marketplace and right now it is struggling to find its own niche. Microsoft is hoping to increase their mobile platform’s appeal with tie-ins with Office and Xbox 360.

At Barcelona’s Mobile World Congress Microsoft CEO Steve Ballmer demonstrated Rally Ball. Using two Windows Phone 7 headsets and a Kinect device, the game had balls launched towards the player of the Kinect game using the headsets.

It’s only a tech demo for now, but its an interesting way to think about how the market for Windows Phone 7 would be expanded.