Peter Molyneux, the man behind Fable and Fable 2, held a presentation a few hours ago at the Games Developers Conference that is currently taking place. Not only did he mentioned some new details of the game, also the first footage has been shown to the press.
Fable 2 will feature a side-kick in the presence of a dog, which you can raise yourself from puppy to a large grown-up dog. It's up to you if you want it to be nice and friendly or strong and agressive. You can also command the dog. Molyneux calls it a 'risky feature' but also something 'you have never seen before'.
It is also possible to have sex in Fable 2. Not only with people from your own race, but also from other races. New is the option to have protected or unprotected sex, which can lead to pregnancy. Since you can choose to be a man or a woman, you might even give birth to your own child.
Unfortunately Molyneux also said that Fable 2 won't make it this year, which means that the game will be released sometime in 2008.