Microsoft officially announced today at E3 that eventually will support HD DVD format via an external USB drive.. Microsoft revealed that the USB HD DVD ROM drive will connect to the 360 using a USB 2.0 cable, and will use the console itself to output HD video and surround sound.

"Xbox 360 ushered in the era of high-definition gaming by standardizing high-definition resolutions and 16x9 widescreen support for every game on the system. What's more, Xbox 360, while powerful on its own, is also a foundation from which new technology and accessories can be added. Chief among these is the recently announced HD DVD add-on," said Microsoft in a press release.

This new accessory will connect to the Xbox 360 console with a USB cable, enabling it to harness the power of the Xbox 360 console for the HD video outputs and digital surround sound.

So the HD DVD drive will apparently have no HDMI interface, and it could be connected to an HDTV via the HD enabled component video output of the Xbox 360. This could make the price of the HD drive attractively low.

So what's the suggested price for the Xbox 360 HD DVD player? "We decided to save that good news for another day, but we're clearly out to make this an affordable option for Xbox 360 owners," said Albert Penello, Director of Global Marketing at Xbox.