By Alfred Hermida
Technology editor, BBC News website
Microsoft's new console will be called the Xbox 360 and be in the shops by Christmas, the company has announced.
The Xbox 360 can stand on its end or on its side
The white, sleek machine was unveiled during a glitzy show on MTV in the US, hosted by actor Elijah Wood.
Microsoft is the first console maker to show off its next-generation video game machine.
Rivals Sony and Nintendo are expected to provide more details about their consoles next week at the annual games trade show, E3 in Los Angeles.
This is the first major home game console launch since November 2001.
The Xbox 360 is one of the most important products for Microsoft this year. The software giant has poured hundreds of millions of dollars into becoming a leading player in the world of video games.
New consoles are usually unveiled at E3 (Electronic Entertainment Expo). But Microsoft has ruffled some feathers by offering gamers a first look at the 360 on MTV.
As was widely expected, Microsoft has abandoned the black, boxy look of the Xbox for a far softer design, with curved edges and a clean white look.
XBOX 360 SPECS
CPU with three IBM PowerPC 3.2Ghz cores
ATI 500MHz graphics processor
48 billion shader operations per second
512Mb GDDR3 RAM of memory
Removable and upgradeable 20Gb hard drive
Three USB ports
Windows Media Extender built-in
Support for DVD-video, DVD-ROM, DVD-R, DVD+R, CD-DA, CD-R, WMA CD, MP3 CD, Jpeg photo CD
The front panel houses a disc drawer, two memory card slots, an infra-red receiver for an optional remote control, the power button and two covered USB ports.
Separate panels will be available to replace and customise the front of the console.
The controllers are similar to current ones, but are wireless and white to match the console.
The machine is designed to stand on one end and comes with a removable 20Gb hard drive.
"They're hoping it will captivate people from the off," said Margaret Robertson, games editor with the specialist games magazine Edge.
"It is certainly going to alienate far fewer people than the first Xbox design," said Ms Robertson, who was given exclusive access to the 360 for Edge.
The technical make-up of the machine is largely what was expected. Under the bonnet, the 360 is powered by a processor with three IBM PowerPC 3.2GHz chips, with a custom ATI 500MHz graphics processor and 512Mb of RAM.
According to Microsoft, this will offer a teraflop of overall performance.
"There is not a lot there to raise eyebrows," said Ms Robertson.
XBOX 360 GAMES
Call of Duty 2
Tony Hawk's American Wasteland
Madden NFL 06
Need For Speed: Most Wanted
Ghost Recon 3 (shown)
Tiger Woods PGA Tour 06
Perfect Dark Zero
Kameo: Elements of Power
Project Gotham Racing 3
Gears of War
"But Microsoft's argument is that it is not about the specs. Specs are irrelevant if you don't have the tools to support developers."
The 360 builds on Microsoft's online gaming service, Xbox Live. More services will be available to paid subscribers, while others will be able to access some of the service for free.
Microsoft is not talking about the 360 as a digital entertainment hub. But the machine can be used to play music, watch DVDs and stream media from portable devices or a Windows XP computer.
What is not known is if gamers will be able to play current Xbox games on the 360. The price of the console has yet to be announced but some speculate it could go on sale in the US for $300 (£162).
Microsoft is aiming for what is called backwards compatibility but is facing technical difficulties.
Games for the 360 itself will be designed for widescreen high-definition screens and are expected to offer a dazzling level of graphical detail.
A range of titles are under development for the machine, with Kameo and Perfect Dark Zero from developers Rare leading the way.
But it is not known which games will be ready by the time the console is released, which is due to be by Christmas according to Edge.
Microsoft was a year behind Sony's PlayStation 2 in launching the original Xbox and it never managed to make up the time.
Xbox is a distant second in console sales behind the PlayStation 2, in a market that analysts predict will be worth $11.3bn (£6.1bn) in five years' time.
This time round, the software giant is aiming to be first out of the gate. The Xbox 360 is due to go on sale before Christmas, launching first in the US, closely followed by Europe and Japan.
Sony's PlayStation 3 and Nintendo's Revolution are not expected until next year.
"Microsoft think they can be market leaders," said Ms Robertson. "That would be an astonishing thing to happen. Sony would really have to drop the ball."
"Nintendo is the dark horse. What is interesting is that they are looking to change who plays games and how you play games."