Getting to the point there are going to be two console as part of the redesigned Xbox Line of products. A repackaged and reoriented Xbox 360 unit and the new Durango gaming console, both designed to compete with more than Sony in gaming, but against Apple as well.



When the Durango (game machine) launches, it will not support backwards compatibility for 360 games out of the box. Instead, this functionality will come from the other unit that will be networked with the Durango to provide this (not unlike the DVD add-on for the original Xbox).



The purpose of the smaller Xbox unit is to compete with Apple TV, but also provides XBLA and 360 game support which will give it an edge over Apple TV. The rumors of always online required comes from the smaller Xbox unit which may not have a disc drive and like Apple TV it would require a network connection and internet to provide any real functionality. It may be possible they will design both consoles to be stackable.



Durango itself will also always be online like any other device (correct with rumors), but it will not be a requirement to play local content and it will not prevent playing used games.