Microsoft Game-Hunting

At its most basic level, the service will allow Xbox 360 users to instant message people using the Windows Messenger service on their PCs or cell phones. But the service will also allow users to play games on the Xbox 360 in real time against opponents who may be playing on their cell phones or PCs. And it will allow users to order additional content -- such as weapons or cars -- for their Xbox 360 games using their phones or PCs.

The service will be part of the consumer version of Windows Vista when it ships in January, Gates said. Gates did not say how much the service will cost. Microsoft has two levels of Xbox Live -- a free version that offers basic services and a $70 version that allows users to play multiplayer games.

"We're thinking about this in a holistic way," Gates said of the company's efforts to tie all three platforms together. "Microsoft is probably the only company that will be able to pull this off."

Of course, it remains to be seen how much demand there will be. Less than 10% of original Xbox users signed up for the Xbox Live platform. Microsoft has done much better with the Xbox 360 -- more than half of owners of the new game console are connected to Xbox Live. But the company has not given a breakdown of how many of the Xbox 360 users are actually paying for Xbox Live.