Director Robert Zemeckis and a team of 500 visual-effects specialists at Sony Imageworks have been working on the computer-generated family-film "The Polar Express" for three years, but only recently did they make a perilous discovery: Tom Hanks has fat fingers. Not the real, flesh-and-blood, Oscar-winning Tom Hanks--his fingers are lovely. It's the digital Hanks who's got the fatty digits. "We got back this one shot where Tom is playing the train conductor," Zemeckis says. "He wipes his brow, and we were, like, 'Whoa! Geez, look at those things!' "

In the $165 million film, based on Chris Van Allsburg's best seller about a young boy's Christmas journey to the North Pole, Hanks plays five different roles. To pull it off, Zemeckis's team pioneered a technique called performance capture. Hanks's face and body were covered with 194 plastic "jewels," which guided 72 cameras capturing his movements from all angles. Then, depending on whom Hanks was playing, animators wrapped digital faces and skin around the collected data. It's actually much more complicated than that, but back to Hanks and his fat fingers. Capturing fingers is tricky because of all the bones and muscles and joints. Sony's computers could handle only one jewel on each of Hanks's fingers without overloading and that didn't yield much data for the animators to work with. So early versions of his fingers came back looking like kielbasa. "Well, they do say the camera adds 15 pounds," Hanks jokes. If he seems untroubled it's because, today, no matter how much weight the camera adds, Zemeckis and his effects wizards can just scrape it right back off.

Almost every new Hollywood blockbuster now arrives with the promise of showing audiences something they've never seen before. Usually, it's baloney. (No one's ever blown up Portland!) Quantum leaps like "Terminator 2" and "Jurassic Park" are rare in visual effects; just as often, big breakthroughs come in lousy packages and quickly vanish, like Sony's 2001 atomic bomb "Final Fantasy." Audiences will decide the fate of "The Polar Express," but inside the visual-effects industry, there is keen interest in the film. And it's not because of any single magic trick. It's the whole package. Gollum in "The Lord of the Rings" was created with an early version of performance capture, and the "Matrix" sequels achieved a high degree of digital realism. But no one's ever mounted an entirely CG film based on the acting of an entirely human cast. "What they've done," says John Gaeta, the Oscar-winning visual-effects supervisor of the "Matrix" trilogy, "is absolutely landmark."

That's sweet music for Warner Brothers, which bankrolled the film and is going to need lots of juice behind it to hang with "The Incredibles," Pixar's next juggernaut-in-waiting, set to open five days before "The Polar Express." "When a film is this expensive and we have this much riding on it, I'd be foolish or naive not to be concerned," says studio president Alan Horn. "But I really like this movie. I think it delivers." Still, a face-off with "The Incredibles" is less than ideal. Pixar movies like "Toy Story" and "Finding Nemo"--as well as DreamWorks' "Shrek" franchise--have conditioned audiences to expect hipness and irreverence; "The Polar Express" is far more elegant and sincere.

Visually, it's a one-of-a-kind experience. (Equally unique: a 3-D IMAX version will open simultaneously on Nov. 10.) And in today's Hollywood, that's crucial. Eight of the top 10 box-office hits of 2004--and 19 of the top 20 grossing movies to date--have boasted massive visual-effects work. It is axiomatic in Hollywood that the story drives everything, that good effects can't save a bad movie. But if you're swinging for the fences, you won't get there without melting some eyeballs. "Just 15 years ago, a big tent-pole film might've cost $50 million, and 10 percent would be visual effects," says Jim Morris, president of Industrial Light & Magic. "Now it's very common to have a $150 million budget and a third of that going to visual effects."

The point of visual effects is to make the unreal merge with reality. Which is why, industrywide, the race is on to pull off the ultimate trompe l'oeil: photoreal, emotionally evocative digital humans. Fake people, in other words, who are indistinguishable on screen from real ones. "That is the holy grail," says Gaeta. "And it's going to be possible soon." OK, but how soon? Effects wizards are actually closer than even much of Hollywood realizes. "Spider-Man 2" and the "Matrix" sequels featured photoreal faces during some action scenes, but only brief glimpses. A digital human you can really stare at and believe is probably two years from the big screen--but it's on the computer screens of at least one effects shop right now. Venice, Calif.-based Digital Domain (graphic) gave NEWSWEEK an exclusive look at a test film starring a photoreal male human. "Five years ago we'd still have said, 'No, you can't do it'," says visual-effects supervisor Mark Forker. "Now we'd never say that. There's nothing we can't do." For competitive reasons, Digital Domain won't let us reveal more about its creation, and we should note that he does not speak or interact with any human actors, both of which are high bars to clear. Still, the work is a full generation beyond what anyone's witnessed on screen so far. Finishing the job, though, will take piles of money and something even more elusive: a really good, creative reason to do it. After all, why spend millions of dollars building a digital human when live actors come so cheaply?

More than any other major director, Zemeckis, 52, has made his mark coming up with creative reasons to push the visual envelope in movies. He blended hand-drawn animation with live actors in 1988's "Who Framed Roger Rabbit," took CG baby steps in 1992's "Death Becomes Her" and inserted Hanks into archival TV footage in "Forrest Gump," for which he won a directing Oscar. "Bob is not interested in doing anything the way it's been done before," says Hanks, who does a killer impression of his pal's excitable squawk. "He's always saying, 'Well, anybody can do that!' "

"The Polar Express" presented a unique challenge. In the book, a young boy (played by Hanks in the film) whose belief in Santa Claus is on the wane gets roused on Christmas Eve by a massive train stopped outside his house. The conductor (Hanks again) invites him aboard for a trip to the North Pole and a meeting with Santa (guess who). "A live-action version of this film would be impossible. It would cost a billion dollars," Zemeckis says. "You'd have to find a kid who's as good an actor as Tom, and you'd have to keep him from growing for two years, because that's how long it would take to film." Standard animation, though, was also out of the question: Van Allsburg was opposed to it. So Zemeckis suggested blurring the lines and creating a stylized reality, or, as he labels it, "moving paintings."

There was one hitch: it wasn't possible yet. The necessary computing power alone would have been staggering. So Zemeckis and his team nibbled at first. In 2001, using a $1 million test budget from Warner Bros., they attempted to film one brief scene: the train arriving outside the boy's house. It worked. The process they used would become the blueprint for the rest of the production and, when all the dust settles, may influence the future of Hollywood filmmaking far more than the movie itself.

Every second of "The Polar Express" was filmed in a 10-foot-by-10-foot space on a soundstage at Sony Studios. Zemeckis and his team dubbed it "the volume." Arrayed around the volume were 72 Vicon motion-analysis cameras, each with a glowing orange ring around the lens--the visual evidence of infrared light shooting from the camera and filling the volume. When the infrared light collides with a jewel on an actor's body, the light gets reflected back into the camera and computers record the jewel's position. The camera's "shutter" clicks 120 times per second. With 194 jewels on each actor--152 on each face--the computers could connect the dots and generate a thorough "shell" of the actor's performance. Then the animators took over.

The process had its limitations. Props had to be built out of chicken wire to allow the infrared light to pass through and reach the jewels. And the data were so immense that the cameras had to be trained on a tiny space or risk computer meltdown; hence, a stage of only 10-by-10 feet. If a scene called for actors to move from one train car to the next, Zemeckis would have to film the first car, strike the entire set, build the second car, then resume filming. "We literally made this movie 10 feet at a time," says visual-effects supervisor Jerome Chen. Zemeckis compares filming in the volume to black-box theater, in which an actor must use his imagination to create everything he sees. Hanks loved it. "It was as fresh as the first time you felt like a real actor in college," he says. "It sounds complicated, but really it was simple as can be."

The real spoils, though, went to Zemeckis. By capturing the performances of his actors in three dimensions, he could go into the computer and place a "virtual camera" wherever he wanted. Virtual cameras were first used on the "Matrix" sequels, but only for action sequences; Zemeckis used them to make his entire film. The implications are huge. The tool allows a director to separate two complicated, creative tasks that, until now, always had to occur in precise concert: the performance of the actor and the movement of the camera. Zemeckis could concentrate on getting the exact performance he wanted from Hanks, and then, months later, after Hanks had long since left for vacation, plan out his shot. "When I think about the pain of going back to making 2-D movies--it's almost not worth it," Zemeckis says. "Why bother? What if it rains?"

As the price tag for virtual cameras comes down and the quality improves, a director will gain almost unlimited control over all aspects of a film. For better or worse. "Here's where it'll go," says Zemeckis. "I say to an actor, 'Look at that door and blink three times.' And the actor says, 'No way, that's stupid!' And I can say, 'OK, fine. Don't do it.' Then, when the movie comes out, he'll be blinking three times." Zemeckis laughs. "Now that will be great." He's joking, of course. Sort of. But it's not too much of a leap to imagine a future in which actors don't even need to show up for work. "I can just hand them a disk," Hanks says. " 'Here's my data. Send me the check'." And what about an actor's afterlife? With his data stored on a hard drive, Hanks could theoretically "act" in some form forever. But what about a less-familiar actor with no estate caring for his image--or an estate that greedily exploits it?

Some believe that "The Polar Express" hints at an age when Sean Connery can play James Bond again and appear on screen as his dapper, 32-year-old self. Don't bet on it. "It becomes a failure when people start saying, 'We're gonna duplicate Meryl Streep!' Well, why would you want to do that? She's right here," says Jim Rygiel, the Oscar-winning visual-effects supervisor of "The Lord of the Rings" trilogy. "There's talk in my field about creating Bogart and Marilyn Monroe and making movies with them again. But you'll never really be able to do it because you can't capture their souls in a computer. You'll never know how Bogart would've played a scene. And ultimately that's what people pay to see."

The same issue--the gulf between what's possible and what's creatively worthwhile--plagues the pursuit of digital humans. Many visual-effects experts seem excited by the chase only because studios are paying them to be. "For us, it's basically a technical exercise," says six-time Oscar winner Dennis Muren of ILM. For Hollywood, Muren says, "it's all a marketing thing. Lots of directors have brought us scripts with those kinds of characters. They seem to feel if it's done in a computer it's more important or godlike than an actor wearing makeup. And I completely disagree. I just don't get it." Still, he notes, "we are working in it. The clients are asking for it. Anybody who says they can do it now for an audience, though, is deluding themselves because it's just too expensive. And if it isn't exactly right, it's gonna lay a big egg on screen." Even the folks at Digital Domain, who appear to be in the lead at this point, know they've got miles to go. Says effects supervisor Erik Nash: "You've trying to convince people they're seeing something that they've spent their entire lives studying: the human face."

Money matters aside, the key missing ingredient right now is creative inspiration. Zemeckis says he's itching to make a live-action film where the main character ages dramatically--and he wants to do it digitally, not with makeup. He's just waiting for the right script. "The Matrix's" Gaeta thinks the first film boasting "entirely photoreal virtual content" could arrive within five to seven years. (Anime fans: imagine a photoreal version of "Akira" or "Ghost in the Shell." Now imagine how much that would absolutely rule.) "Hollywood will only understand the possibilities when a maverick shows it to them," says Gaeta. "It's going to take someone who's larger than the studio system to pull us into the 'Citizen Kane' of virtual cinema." What's thrilling about "The Polar Express" is as simple as this: the train is on the move.