Microsoft's new plans to enhance its Xbox 360 video game console's potential as a home entertainment hub may ultimately put pressure on Apple to improve the Apple TV, if revelations at this week's E3 conference in Los Angeles are any indication.

At a Monday press conference before the start of the gaming trade show that officially kicks off Tuesday, Microsoft unveiled a roster of new games, exclusives, and other details about the future of its Xbox 360 video game console. Some of those details involve the Xbox 360's ability to deliver video and audio entertainment to families, rather than just games.

People have often asked me why I don't have an Apple TV, and the simple answer is because I don't need one. I have an Xbox 360, and it can serve up digital photos, video, and audio from networked Macs using software like Connect360 from Nullriver Software or Rivet from Cynical Peak Software. (I use similar software to interface my Mac with my PlayStation 3, too.) If I had a Windows Media Center PC I could link that using built-in software on the Xbox. And Microsoft's Xbox Live online service offers video purchases and rentals, same as the Apple TV.

Microsoft VP John Schappert revealed his company's plans to extend those non-game capabilities at Monday's press conference. The video shop for purchasing and renting digital movies for the Xbox 360 will be rebranded "Zune Video," after the company's portable media player (and ostensible iPod competitor), and video content soon will be served is 1080 progressive (1080p) format.

This will mark a big quality improvement for Xbox 360 users using high-end HDMI-equipped HDTV sets. 1080p is better than either Xbox Live now, or the iTunes Store's current HD offerings, both of which are limited to 720p.

Microsoft is also calling this video "Instant On 1080p HD"--the content doesn't need to wait to download before you can start watching it, bringing the experience more in line with what iTunes Store users have long experienced, but at a higher resolution.

Microsoft is also expanding the availability of movie rentals and purchases for the "Zune Video" store, from eight countries to 18, making more video available to more Xbox 360 users around the world. It's still a far cry from Apple's iTunes Store reach, but Microsoft has found content providers who want to reach as many paying customers as they can, and that's bound to turn up the heat on Apple to find new, exclusive content it can sell or rent to its users.

Microsoft is trying to make even passive entertainment like watching a TV or movie more social. The company is adding the ability to sit with your friends--well, their Xbox Live avatars at least--and watch videos together. You see them movie theater-style, with their backs facing you--similar to the Mystery Science Theater 3000 show. You won't be interrupted by their cell phones, either.

Schappert also announced new strategic alliances, including sports from The Sky Network. (Oh, please, let me watch rugby matches on my Xbox 360, Sky and Microsoft, so I can do the haka along with the All Blacks in the privacy of my living room.)

The company is expanding the Xbox 360's social networking capabilities by adding support for Facebook and Twitter, as well, so you can stay in touch with your friends as you're playing games. And popular music-based social networking service Last.fm will soon be supported on the Xbox 360, so you can let people know what tunes you're listening to.

All of these efforts--social networking, more video and audio programming, better quality--add up to a more well-rounded entertainment experience for Xbox 360 users. This only widens the gap between the relatively dedicated-purpose Apple TV and other home entertainment devices in the same price range.

Hopefully Apple will find a way to narrow the gap--not by making the Apple TV a game console, I think that would be a big mistake--but by continuing to improve and expand the other entertainment services it offers, and by keeping the iTunes Store competitive with the increasingly complicated digital entertainment landscape.

This story, "Xbox 360 Service Improvements Put Apple TV to Shame" was originally published by Macworld .