With Sony pushing 1080p hard, Microsoft decided it was time to push back in a big way. Microsoft has just announced that an update, coming later this year, will enable 1080p on the almost year old Xbox 360 video game system. This can be achieved over the component or VGA video cables. As soon as the update is applied to your Xbox 360, all DVD's and current games will be upconverted to full blown 1080p should your television support the resolution. HD-DVD titles will also be able to play back in 1080p (yes, they announced the long awaited external HD-DVD drive, too).
News source: Engadget
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