Consoles are setting the pace for video- and computer-game development, and the Xbox 360 is the first in a new series of next-generation video game systems that we'll be hearing more about in the next week.

The public unveiling of the new Xbox 360 last week trumps announcements expected next week from Microsoft rivals Sony and Nintendo. Both companies are expected to provide information about their new systems at the Electronic Entertainment Expo in Los Angeles this week.

Equipped with wireless game pads, the new Xbox is a far cry from the clunky plastic hell and tangled mess of wires that was the original Xbox. It's about almost a third smaller than the existing unit, so it takes up less space in your home entertainment rack.

The Xbox 360 features 512MB GDDR3 RAM, eight times as much as its predecessor. More RAM equals sharper visuals, cleaner textures and more detailed game environments. The Xbox 360 will be able to render massive environments loaded with an eye-popping level of detail.

Looking further into the guts of the box, the Xbox 360 features a 500MHz graphics chip developed by ATI, the same company that makes graphics hardware for leading PC manufacturers, including Apple. The chip features 48 pixel shader pipelines – enough to produce dazzling special effects that we haven't yet seen on consoles or PCs.

At the core of the Xbox 360 is a set of three symmetrical IBM PowerPC processor cores, each running at 3.2GHz. That's a faster clock speed than the fastest Mac, and it significantly outpaces the single 733MHz Intel processor that graces the original Xbox.

That brute-force CPU power will come in handy as Xbox game developers boost polygon counts in characters and create even more realistic looking environments for their games.

Good news for home-entertainment buffs who double up their video-game system as their home DVD player, too: Xbox 360 works out of the box as a DVD player; you don't have to buy any extra hardware to get it to work like you do with the current model.

Progressive scan is now supported for smoother and sharper DVD playback. And the console touts a 20GB integrated hard disk drive that's detachable and upgradable if necessary.

As far as we know, Xbox 360 games will ship on standard and dual-layer DVDs, unlike Sony's PS3, which will use high-density Blu-ray DVDs. Recent speculation suggests that Xbox 360 may be outfitted with HD-DVD instead, but Microsoft won't comment.

Online gameplay is central to the new Xbox, and there's an Xbox Live-enabled toggle button placed dead-center on the controller. The new console also features built-in Ethernet and support for the 802.11a, b, and g variants of Wi-Fi wireless networking (802.11g is what Apple uses in its AirPort Extreme cards).

Microsoft hasn't made many changes from the Controller S that's standard issue on the Xbox now; the wireless controllers are about the same size. Players will also have the option of using the Xbox 360's USB port. And as an added bonus, PC players will be able to use the Xbox 360 controllers, too.

There are still some unanswered questions, the biggest being, does the Xbox 360 support backward compatibility? Microsoft has been quiet on the subject, and that's not a good sign. We'll hopefully know for sure at E3.

From a technological standpoint, the Xbox 360 is best described as absurdly powerful. Sony and Nintendo have a bitterly long row to hoe if they plan on one-upping this technological titan. But in the end, all the technology in the world won't save you if you don't have great games to back you up; Microsoft's biggest challenge will be roping in top-tier publishers (such as Rockstar and BioWare) and providing amazing Xbox 360-only games. It's already at a good start, considering Microsoft's recent deals to work with Final Fantasy creator Hironobu Sakaguchi and Tetsuya Mizuguchi.

Steve Fox of contributed to this report.