The Skylon spaceplane is a single stage to orbit craft, meaning that it doesn't use booster rockets of any kind and can take off and land from a conventional runway. This kind of integrated package is tricky to put together, but if they can make it work, the cost of launching a payload to geostationary orbit would be fifteen times cheaper than it is now.
The ESA checked out the design of the Skylon, focusing on the sophisticated Sabre engines, and found that so far, "ESA has not identified any critical topics that would prevent a successful development of the engine." This is high praise for such a complicated concept: the engines have to operate seamlessly between sea level and orbit and be durable enough to refuel and reuse over and over.
The Sabre engines are essentially just rockets, burning hydrogen and oxygen to produce thrust. What's unique, though, is that at lower altitudes, the engines scavenge oxygen directly out of the air instead of having to carry it. For this to work, the incoming oxygen has to be cooled down to about 200 degrees below zero, even when the Skylon is traveling at such high speeds that the air entering the engine comes in at 2,000 degrees. And it has to happen in 1/100th of a second. The solution has been to feed the air through a complex system of tiny little heat exchanging tubes, which doesn't seem like it would work, but the ESA says it does. And in any case, the next step is for a prototype Sabre engine to be built, which will show off both the rocket and air-breathing engine modes and the transition between them. If all goes well, it should happen this summer.
It's looking more and more like this thing might turn real within the next five or ten years, and to get a sense of our Cylon-filled Skylon-filled future is going to be like, check out the gallery below.