It's sleek, white and may change the way you use your living room.

At least that's the hope of Microsoft, which unveiled its new Xbox 360 console Thursday night on an MTV special. Scheduled for release this holiday season, the Xbox 360 will be the first of the next-generation consoles to hit stores, beating the PlayStation 3 and Nintendo Revolution which are expected out next year.

While the Xbox 360's massively beefed up specs promise improved gaming, Microsoft clearly hopes that the machine's other attributes will convince non-gamers to buy in.

The 360 will play both DVDs and music, and a peripheral camera allows for video chats with other Xbox users. It will also allow players to replace in-game music with their own favourites.

"We want to change the way people think about having fun, give people a new entertainment experience," says Xbox boss Robbie Bach.

With high-definition TV gradually creeping into homes, Microsoft sees the 360 as an ideal accompaniment, for example, allowing people to put on a family photo show on their big television rather than a small PC monitor.

The game controllers are wireless. Plus a remote will be included. The hard drive is detachable and upgradable.

There's no word on price yet, although Microsoft corporate vice-president J Allard says it will cost less than an IPod photo, which starts at $439 Cdn. The original Xbox, which has sold more than 20 million copies since its release in November 2001, currently retails for about $199 Cdn.

Microsoft has been tight-lipped about backward compatibility, saying at a recent roundtable in Redmond, Wash., for Canadian reporters that it was not ready to talk about that yet. That does not bode well.

Corporate vice-president Peter Moore did say production of the original console will continue, with accompanying game production expected into 2007.

The original Xbox also plays DVDs but a special accessory pack is needed. Microsoft promises a more seamless experience this time.

While the Xbox 360 is white, it can be customized with faceplates -- just like cellphones. That ability to customize is all part of appealing to what Xbox guru J Allard calls the Remix Generation whose mantra may soon become Pimp My Xbox.

While you can't surf the Net, the 360 is still big on connectivity, providing the user has broadband service. The controllers and 360 feature a so-called ring of light button that flashes an alert when a voice or video message comes in -- or a request to play from another gamer.

Xbox is also upgrading the information available on other gamers, including performance ratings and gamesmanship.

Microsoft is lifting the curtain on its Xbox Live online service, which currently has 1.5 million users worldwide. The Xbox 360 will offer two levels of online service -- the Cadillac model includes multiplayer online action while a streamlined version offers everything but online multiplayer.

The so-called Silver Club will allow users to access the Xbox Live marketplace, allowing them to buy new content for games as available. Free weekends will be held to induce people to upgrade their online service.

Gamers won't have to use credit cards to buy such material online. Pre-paid points cards, with codes that allow shopping, will be available in stores.

Microsoft promises strong parental controls on the 360, which will be handy given the addition of the camera to the system.

As for the games themselves, samples shown in Redmond looked promising.

Footage of basketball star LeBron James from an early version of NBA 2K6 by Visual Concepts of San Rafael, Calif., was especially eye-catching from the way the fabric moved on his clothes to the player's musculature and movements.

Ghost Recon 3, developed by Ubisoft's Montreal studio, also looked sharp.

"You're going to be right in the battle," said Moore.

The launch lineup will be a minimum 10, maximum 16 titles.

Microsoft has yet to make money on Xbox and says it will take a while to get into the black.

"As with any platform in the initial years, making a lot of money on the hardware is not part of the business plan," Moore said. "It's getting a strong installed base.

"Every platform when it launches has always been a loss-leader."

Microsoft's Home and Entertainment division, which covers Xbox, reported losses of $154 million US in the fiscal third quarter ending March 31.

Like other gaming companies, Xbox is looking to expand beyond hardcore gamers. Bach estimates video game penetration in North American households at 35 per cent, compared to 90-plus for other forms of entertainment.

His goal is to make games more accessible -- easier to play and to draw new players into the scene with the likes of social games such as Texas Hold Em Poker complete with video links.

In the words of Allard:

"It can't just be about gaming any more. Gaming is at the soul of everything we do with Xbox, just like the thing in my pocket is about making phone calls.

"But the thing in my pocket was purchased knowing that I wanted a colour screen and I wanted a camera and I needed to do text messaging on it as well ... I think it would be unwise for us to ship a video game console that didn't play movies or didn't play music, for example."

Allard knows the 360 inside and out, but even he isn't sure what it will bring to the table.

"We have the opportunity to enlist tens of millions of people to bring something to the party," he said. "Not just to experience it, not just slack-jawed drool on the controller, have the fun the way we intended them to have fun.

"Let's have them create the magic. I don't even know what it's going to look like."

Microsoft is already talking about a spectator side to gaming, allowing people to watch the best players in sponsored tournaments.