The announcement was made at Microsoft's flashy Electronic Entertainment Expo press conference at University of Southern California's Galen Center.
Microsoft also debuted 10 exclusive new games and the ability to access social networking sites Facebook and Twitter as well as streaming music service Last.fm on the Xbox Live service. The popular social networking sites Facebook and Twitter will be fully integrated into Xbox Live beginning this fall.
There were several announcements about the Xbox 360's video capabilities including increased functionality with the online Netflix service, 1080p high-definition video downloads, live TV in the United Kingdom and the ability to watch movies online with friends.
Microsoft also debuted 10 exclusive new games. Among them: the open-world action sequel "Crackdown 2," New Orleans-set zombie-killer "Left 4 Dead 2," third-person shooter "Splinter Cell Conviction," sleek racer "Forza Motorsport 3" and the psychological thriller "Alan Wake."
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