The next-generation console was shown off alongside a new Kinect sensor and a redesigned gamepad. The US firm described the voice and gesture-controlled machine as an "all-in-one" system offering games, live TV, movies and music.
The firm's Entertainment and Devices Division accounted for $9.6bn (£6.3bn) worth of sales in Microsoft's last financial year. That only represented about 13% of its total revenue for the period - but one analyst said the importance of this launch should not be underestimated.
"Microsoft is very strong in business software and the enterprise cloud business, but its consumer businesses are facing tremendous challenges: PCs are declining rapidly and Windows Phone handsets have only a fraction of the market shares of rivals," said Jia Wu from consultants Strategy Analytics.
"Xbox represents Microsoft's core strategy in the consumer entertainment market, especially after it sold its Mediaroom video distribution business to Ericsson earlier this year.
"This is also the unique asset which Microsoft has that can differentiate itself from Apple, Google and several of the other large tech companies. "
The new machine sees Microsoft add a Blu-ray drive and Skype functionality to its console, built in feedback into its gamepad triggers, and upgrades its Kinect camera sensor to 1080p high definition resolution.
It said the Kinect would allow the device to better analyse body movements allowing users to more accurately control game characters and navigate other entertainment options.
Source: BBC News
