The prize is awarded after judges hold a conversation with the AI, asking questions to determine its "humanity" and the quality of its responses.

Joan is a "26-year-old budding writer" who exists only on a set of computer servers. Last year's Loebner prize went to Icogno's AI called George.

'Big difference'

Joan and George's creator Rollo Carpenter said: "The big difference overall between the two AIs is that Joan has learnt from the general public and has grown a huge amount in the last year and is keeping ahead of the competition."

Joan is one of the firm's so-called Jabberwacky bots, which develop their conversational skills by speaking to the general public online.

English writer Ariadne Tampion worked with Mr Carpenter to help develop Joan's persona by chatting to the AI online.

Those conversations helped develop the majority of the 16,000 lines that distinguish her from a generic AI. In all, the bot has more than five million lines of conversation available to it.

"She helped create a much more conversational ability for Joan than George last year.

"It does not mean the AI only ever uses her words. Any amount of teaching is not quite enough for a realistic conversation."

He added: "So the AI uses other things said by other people to it that fit the conversational model."

The underlying technology that powers George and Joan is the same, said Mr Carpenter.

"In terms of her ability to retain her character Joan is more sophisticated than George.

"The technology has moved on a bit during the course of the year but there's been no revolution."

The technology which powers Joan resides on Windows server machines. The core of the AI is on a Dual Xeon machine with lots of memory, said Mr Carpenter.

He said there was a very direct relationship between the computing power available and the sophistication of the AI.

'Rate of learning'

"Investment in a lot more equipment could accelerate the rate of learning," he said.

"If I had Google's hardware behind it and more hits than Google receives, the AI's range of utterances could grow by a million every single day." he added.

Mr Carpenter has said he expects a machine to fool people that they are speaking to a human being and therefore pass the Turing test by 2016.

Icogno is now working to commercialise the technology of the AI.

"We are working with an organisation that wants web avatars for use in marketing and entertainment purposes.

"Long term we see the use of AIs in call centres, support services and even for sales."

One day in the future when you pick up the phone to seek help with your broadband connection, the person you are speaking with may be George or Joan, AIs residing on a computer somewhere in the world.

The following is an extract of a conversation between one of the Loebner judges and the AI Joan:

Judge: But can't a machine think?
Joan: It may be possible.
Judge: And conscious?
Joan: Not after I'm done with you.
Judge: What are you going to do to me?
Joan: Nothing. I just wanted to talk.
Judge: What about?
Joan: Being tested like this.