XBox 360

Microsoft unveiled the new XBox. The person in the above photo is actually an MS employee. (!) She's actually pretty cute.

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Microsoft fired the opening salvo in the war of the next-generation videogames Thursday night by unveiling the successor to the Xbox on an MTV special.

Sleek and off-white, the new Xbox 360 system looks like an iPod on steroids. Scheduled to arrive before the holiday season (no price set), the Xbox 360 will usher players into what Microsoft calls the "third stage" in the evolution of games - one of high-definition images and larger environments to be explored through greatly expanded multiplayer and online games.

"Remember going from 2-D games to 3-D? We're going from today's 3-D worlds to high-definition worlds that really will look like a movie or television show," chief Xbox officer Robbie Bach says. All games will be in HD, but only HDTVs will show them at highest quality. Microsoft estimates that 100 million homes worldwide will have advanced TV sets by 2008. "That is going to lead to fundamental changes in expectations, and Xbox 360 is going to deliver."

By releasing Xbox 360 this year, Microsoft hopes to leapfrog Sony, which is expected to announce plans for next year's successor to the PS2 next week at the Electronic Entertainment Expo in L.A. "Sony was dominant in terms of market share this round. It's going to be hard for them to match that (again)," says David Cole of DFC Intelligence. "With Microsoft getting out first, it's going to be more of a level playing field."

Nintendo also will reveal plans for its new system, Revolution, due in 2006. The system will support wireless Internet and play DVD movies plus current GameCube games.

No word yet on whether the Xbox 360 will play current Xbox games. If not, that would disappoint many of the devoted 20 million Xbox owners who will want to play their old games on the new system. And retailers may not be thrilled about devoting space to a fourth console game system (including the current Xbox, PS2 and GameCube), along with the growing lineup of portables (Nintendo's DS and Game Boy SP, plus Sony's PSP), says Richard Doherty of The Envisioneering Group.

Beyond that, the added detail needed for HD games may tax developers and divert resources from making games for other systems this Christmas. "Artists do want to see this higher quality, but it is adding to the cost and time of developing a game," Doherty says.

And Sony's next system is expected to have twice the power of the Xbox 360, so Microsoft may not be able to siphon off many Sony fans. "It may not be the full giant step the PS2 was from the PlayStation," Doherty says, "but it certainly marks the beginning of a new era of games designed to be richer ... and to depend on multiplayer gaming as their main mode: not you vs. the machine, but you vs. a friend."

One Xbox 360 game in development from Rare, Perfect Dark Zero, supports up to 64 players at a time. Most current games top out at 16.

"In every transition, processing power and memory take a certain level of jump," says Glenn Entis, chief visual officer of Electronic Arts, which is examining the possibilities of the new technology. Environments will be more lifelike - you'll see leaves on trees moving in golf games, and the ball will behave differently when hit out of varying degrees of rough. Athletes' faces may be so well defined that "you will start to read the eyes of NBA players, so that head fakes and no-look elements become a part of the game," he says.

Microsoft appears to be on the right track, says John Davison, editorial director of Ziff Davis' videogame magazines. "It's debatable about whether we really need another Xbox right now, but there's no denying the excitement about 360."