Our previous look at Fable 2 covered the basics of social interaction, as well as the companionship provided by a pet dog during the adventure. At E3, Peter Molyneux showcased a dramatically different aspect of his sequel: combat. For the first time, we went hands-on with Fable 2, taking a dive into its dynamic new combat system. While the game is still quite unfinished, what we played gives hope that it will improve upon the original game and establish Fable 2 as an infinitely more sophisticated experience.

Molyneux opened the demonstration on the cobblestone streets of Bowerstone, now a burgeoning city 200 years after the events of Fable. The normally bustling streets were empty, the citizens locked inside their homes under threat of a bandit attack. It was up to our hero to take the bandits out and restore peace to Bowerstone.

Combat in Fable 2 breaks down into three traditional areas: melee, ranged, and magic. Like the first game, you can choose to concentrate on one area of combat or develop all three evenly, accessing new weapons and magic spells as your character gains experience. You'll be able to switch between different types of attacks on-the-fly; more specifically, it'll be possible to swing your sword at an enemy and then follow up by casting an offensive spell. The goal is to create a flexible combat system that grants you complete freedom over how to engage enemies.

Each area of combat is mapped to a button on the Xbox 360 controller. Pressing X executes melee attacks, Y ranged hits, and B casts magic. Engaging enemies can be done with the press of a single button without the need for targeting or extra buttons for combination attacks. Limiting attacks to a single button is an intentional move, Mr. Molyneux explained, to make it easier for casual players to ease into the game.

It'll be entirely possible to mash the face buttons and make your way through Fable 2; however, there's more to combat than mashing – rhythmic presses of the X, Y, and B buttons can trigger combination attacks; additionally, holding down one of these buttons will allow you to pull off a charged blow. You can also attempt environmental attacks such as knocking an enemy against a stone wall for added damage or pushing a foe through a group of wooden barrels. More experience is rewarded for advanced attacks such as these, encouraging more experienced role-players to steer away from button-mashing.

During combat, mini-cutscenes highlight particularly intense moments. A nasty uppercut or devastating blow from a sword is shown via cinematic camera angles in slow motion. Molyneux claims it will heighten the drama of combat, but it seemed to take away from combat more than anything. Every few moments the fighting was interrupted by a mini-cutscene when we would rather have continued knocking around enemies instead.

Should you fall in battle, a dialog will pop up asking you to pay a set amount of experience and gold to revive your character. If you opt out of paying this fee, your character will remain dead for a few moments. During this time, enemies will beat your dead body and scar it. These scars negatively impact your character, lowering his/her attractiveness and unfavorably affecting others' behavior toward you. Vanity, Mr. Molyneux states, will be a primary motivating factor in avoiding death. When faced with the social consequences of being scarred, he hopes you'll avoid death at any cost.

Beyond combat, little else was shared about Fable 2. Cooperative multiplayer and content sharing were hinted at by Molyneux before being silenced by a shrewd public relations representative. With a release set far into 2008, we'll likely hear plenty more about Fable 2 and we'll keep you posted.