Gaming
Dubbed the New Xbox Experience, the upgrade includes several new features and a new menu navigation system.
Players will be prompted to download the 128MB update when logging on to Xbox Live, and requires a hard drive or 512MB memory card to install.
As well as Mii-like avatars, users can stream movies, create multiplayer parties, and transfer games to the hard drive to minimise loading times.
Microsoft will be adding avatars to previous Live arcade games, as well as highlighting XNA community games to download.
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