In an interview with Kotaku at at GDC 07, Peter Molyneux revealed some new details about Fable 2.
"I'm sitting in a small room with Peter Molyneux listening to him talk up Fable 2. There are, he tells me, three big things coming to the sequel to his role-playing game, but he only wants to talk about one of them today: Love.
Love, Molyneux says, comes in three general flavors in the game. There is the appreciation the wide world feels toward your character as he lives and fights in their world. There is the ability to make love and make babies. Yes, you can be both a man or a woman and if you're a woman, you can get pregnant. A first, he believes, for a main character in an RPG.
But the big thing, one of the biggest parts of Fable 2, will be the introduction of a dog to the game. Not just any dog, but your dog. The dog will be faithful to you and will have a deeply nuanced artificial intelligence so you won't actually control your dog at all. Instead your dog will act as a sort of living HUD. The game has no map, no other user interface on screen. Instead you will have to rely on the dog and what he sees and does.
You also will control the dog by your own actions. A great example. You come upon two bad guys and pull our your gun (yes, the game has guns) and the dogs knows automatically attack the closer targets."