Fable E3 Preview
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As you do good things for your fellow townsfolk, you character's look will change to a more goody-too-shoes-ish kind of guy. Your face will become more handsome and you'll get little butterflies flying around your head, a little halo to call your very own, your following of women will increase, and you'll be a generally well-respected guy in town. If, however, you choose to do evil things; like kick people's chickens around town (yes, you can do this), kill an entire household (and then you can buy their house!), and other such evil things; then your appearance will change in that you'll grow devil horns and you'll get glowing read eyes. You'll become uglier (because, as we all know, evil people are a direct result of ugliness), you'll wear a permanent scowl on your face, and so on. Also, as you take damage in battle, your character will show it! If you take a few too many hits to your head, you'll gain a couple scars on your face (that, I'm sure, will wear off with healing); the level of detail that Lionhead is putting into each and every aspect of the game is simply amazing.
Don't think that you can kill a bunch of townsfolk without the local authorities catching you though. If you kill an innocent townsperson in the presence of a guard, the guard will warn you, require you to pay a fine, and eventually, if you do it enough, you'll be kicked out of the town. If you attempt to come back to town, the local authorities will still be after you as well. However, the people you kill stay dead. They won't magically come back to life when you come back to town.