The screen acts as a two-handed touch interface and a crude infrared camera. Users can operate the display with both hands, in a similar manner to the display in the film Minority Report, say its developers.
However, the screen can also recognise particular hand gestures as well as objects placed within a centimetre of its surface, they say.
"It can sense much more than fingers, and is essentially a low resolution scanner and camera," said lead researcher Shahram Izadi, adding that the screen can even communicate wirelessly with other devices nearby using the same infrared technology it uses to see.
He said they developed the technology, dubbed ThinSight, by adding an extra layer of electronics behind a normal laptop screen.
This added a couple of centimetres to the overall thickness, but completely transformed its abilities, Izadi said.
He said the screen "saw" by using a grid of paired infrared sensors and transmitters that sit just behind the backlight of the laptop's LCD panel.
The sensors formed crude images when infrared light bounced off an object, which allowed the screen to identify hand gestures or to see objects, and let them interact with onscreen images, he added.
Co-researcher Steve Hodges said ThinSight could also work as a wireless infrared transmitter and receiver, responding to an ordinary TV remote or other infrared-enabled gadgets.
Izadi said data could be sent to and from the screen using a PDA or cellphone too.
"This could let a user operate the screen remotely or send images for it to display," New Scientist magazine quoted Izadi, as saying.
Presently, the team is developing a 19-inch ThinSight panel, which they say, could someday integrate the feature into current manufacturing processes.