Artificial Intelligence NV (Ai), a company based in Israel, has been in the news quite a bit lately with stories of HAL, Windows based software that is acquiring language from scratch based on statistical models and positive/negative feedback. They claim that HAL now has the language ability of an 18-month old baby! You can read stories about HAL here and here.
While I think these guys are on the right track, from what I can tell, HAL's language is not grounded in anything. HAL might be able to correctly use "apple" in a sentence, but has no perceptual knowledge of what an apple is.
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Re: AI Company Making Great Progress?
Based on this article on Slashdot, it looks like the progress may be on hold.
This is supposedly the original article (although I can't read Hebrew so I can't verify this).
This is a response from a person who claims to be the chief scientist at A-I. He says the project is frozen.