ok..i gotta say this, regardless of how you feel about MS taking over the world...form a shearly businesses perspective, this is brilliant. they own, and they know it. Sony can't deal and neither can nintendo, if mac brought something viable to market they'd stand a chance since they run a seperate OS and dont need to give into MS on certain illegal demands they may make through pushing their OS (unlike Sony, and Nintendo...well..nintendo's been dead to me since they released teh gamecube anyways..)
as far as the future? total integration..the next xbox will be a VOIP hub, iptv settop box, media center PC, and probably have basic PC functionality built in. if you think about it, they're removing the hardware industry from the picture. if MS can make and sell one solid package that does everything you need it to (ie. standard gaming every generation, like a console should have, MS office, internet, communications, etc) built in to one cheap device....they can't be beat. not to mention that w/ the Live initiative they're gonna connect it to your cellphone, your PC (currently, its probably a better idea to keep PCs seperate, unlike i randomly stated above, due to the fact that they make a killing off of windows), and everything else electronic you own.
lets face it, they're brilliant, you gotta give em a hand for that. hell i wouldn't even be surprised if Bill is leaving MS so he can run for president! (<----- sarcasm)