Monolith took the Final Fantasy XII/White Knight Chronicles route with this game: real-time movement combined with time-constrained attacks. Your party is controlled by AI, as are your character's basic attacks. You affect the flow of battle by using your character's special attacks. You can also use the Monado sword's "vision" ability to see a few seconds into the future and anticipate enemy attacks.
Xenoblade will be released in Japan on June 10. Prospects for a North American release are unclear.