The Audeo device picks up nerve impulses in the neck as they head towards the vocal cords. It then interprets these as words and sends them directly to a computer via encrypted wireless transmission.
"Audeo will allow people with disabilities to express their thoughts and ideas, an aspect of life which is often taken for granted," said Michael Callahan, chief executive of Ambient Corporation which created the device.
"Stephen Hawking accomplishes this through the movement of one of his fingers which has remained controllable despite his disease. Unfortunately, most [similar] patients lose all motor control and have no way of conveying their ideas.
"It is our hope that the Audeo will give people back this ability and allow many more profound ideas to change the world through communication."
The device has initially been designed for voice control of wheelchairs and for those who have lost the power of speech.
But other applications could include police surveillance work, or employees in processor clean rooms where speech is difficult.
Like voice recognition software the device requires the user to train it over time, but the learning period is being cut down with better software and faster processors.
So far the device is limited to 150 words but Ambient Corporation hopes to have an unlimited vocabulary version available by the end of the year.
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