(FORTUNE Magazine) – Thanks to a high-tech animation outfit called Modern Cartoons, telling fact from fiction on TV is getting harder than ever. The Venice, Cal., company is the brainchild of Chris Walker, a 41-year-old cartoonist and sculptor who fits actors into body suits equipped with motion sensors and transforms them into cartoon characters. That may not be every actor's dream, but it beats waiting tables--Modern Cartoons characters have been on TV worldwide and have been featured this fall on CBS and NBC.

Here's how it works: An actor dons a sensor-laden vest, headgear, gloves, and booties made out of the same stuff wet suits are made of. (Modern Cartoons has six suits; each costs $300,000.) A cable attached to the vest carries the signals generated by the actor's motions and speech to a substation, which then transmits the frequencies over Ethernet lines to a Silicon Graphics workstation. The computer matches the data with one of its predesigned characters, turning it into a real-time marionette mimicking the actions of the actor in the suit. So when an actor kicks his leg, blinks, or yells, the cartoon character will too. To monitor his movements, the actor performs in front of a big screen showing the actions of his animated alter ego.

Walker made it big when he persuaded executives from the Swedish media conglomerate Kinnevik to back him with a multimillion-dollar investment in 1996. Kinnevik and Walker had previously worked together to develop Modern Cartoons' first character, Hilbur, a chimp with canine-looking features that developed a cultlike following as the "star" of a children's TV show in Sweden. To date, Modern Cartoons has developed 50 characters, including Carmen, a slinky redhead who may host real-life celebrities on a coming Portuguese talk show.

Only this fall did Modern Cartoons break into U.S. television. In September, Steve Oedekerk, the comedian who directed Jim Carrey in Ace Ventura: When Nature Calls, put together a prime-time special for NBC in which he wore Modern Cartoons body suits and played everything from a pig to a skeleton. Walker's greatest coup can be found Saturday mornings on CBS, on a show called Wheel 2000. That's where you'll find Lucy, an animated character playing the role of Vanna who's every bit as entertaining as she cheers on the live contestants playing the network's junior version of Wheel of Fortune.

Modern Cartoons can't compete with the rich visual detail of traditional animation, but it does allow for timely plot lines and efficient production. While it takes almost a year to produce one episode of Fox's King of the Hill, a real-time animation show can be knocked off as quickly as a sitcom. Adults may soon get a taste of what that's like. Walker is developing a satirical political show for HBO. The stars? Animated versions of Bill Clinton and Al Gore. The challenge here, of course, will be to develop a plot line that's stranger than the one occurring in real life.