Along with Windows Live Messenger integration, better Achievements system and that new QWERTY keypad accessory, the Spring Update will also include H.264 video support (up to 10 Mbps peak, Baseline, Main, and High profiles with 2 channel AAC LC) and MPEG-4 Part 2 video support (up to 5 Mbps peak, Simple Profile with 2 channel AAC LC). Unfortunately, the addition of MPEG-4 does not mean the Xbox 360 will now play DivX or XviD videos - the console will only natively support the WMV and MP4 containers. Red Kawa, maker of Videora, proclaimed that the update will put Microsoft ahead of the Apple TV and the PS3 in the video area. The Spring Update will be released the week of May 7 and will be easily accessible to every Xbox 360 owner through Xbox Live or on Xbox.com.
News source: DailyTech