Robotic arm with vision

Hi
I am working on developing a robotic arm with vision capabilities. The
arm is modeled along the lines of the Lynxmotion arms (with base
rotation, shoulder, elbow and wrist motions). I have not added a
gripper  because what I am trying to achieve is object tracking,
teaching the robotic arm movements by observing human arm etc. For
this, I think a single web-cam with a proximity sensor like an IR
distance sensor should suffice.
On the image processing front, standard object tracking techniques like
Image Subtraction will fail because I am mounting the web-cam on a
platform on the robotic arm's wrist. So because the camera itself is
moving, subtracting the current image directly from the previous one
will not yield any result.
I need help in developing the image processing algorithm for the OBJECT
TRACKING APPLICATION.
Thanks

Arun
India