Xbox games will continue to be on DVD-9 (8.5GB DVDs). This is because Xbox 360 games are hitting 720p--as opposed to 1920 by 1080p for maximum resolution high-definition content. Microsoft believes that DVD-9 is continuing to supply sufficient space for storing the content of these games, according to a PC World report. "720p is our sweet spot for next generation rendering techniques--for the lighting, the shadows, the surfaces. That's the sweet spot for the number of pixels to render to, and that's where the GPU is targeted," said Satchell.
For playing back movies, the Xbox 360 will max out at 1080i output. You'll need the Xbox 360 Component HD AV cable ($40), which connects via the unit's audio/video port.
Rival Sony said that the PS3 will output video at resolutions up to 1080p, through its AV multi output.