"All through 2008, we've been making the dashboard better," the company said on its Xbox blog. "So everything was reorganized into a variable number of channels, making everything a lot easier to find."

One of the much ballyhooed new features comes from Microsoft's and Netflix's partnership, which lets Netflix subscribers stream movies and TV shows from their Netflix instant queue. Users can select movies on the Netflix site and start streaming them instantly on consoles. Users will need to be subscribed to an unlimited streaming plan with Netflix.

However, there have been several reports that say that the streaming service does not allow users to stream movies from Sony Pictures. Netflix said that there are licensing issues with the movie distributor which should be cleared up at some point. Meanwhile, other Netflix compatible devices are able to stream Sony flicks. Currently, users can only see releases/shows from Warner Bros., Paramount, MGM and Magnolia Pictures.

Elsewhere, blades have been moved to the Xbox Guide which can be opened by pressing the silver Xbox Guide button in the middle of a controller. The old guide was a single page with a few menus. The new guide puts essential functions front and center.

Players can also create custom avatars and make it a gamer picture; if they don't like it they can replace it at a later time with a regular gamer picture. Players have to be signed into Xbox Live to update gamer pictures with their avatar.

Another new feature is Xbox Live Parties, which lets up to eight people to chat together and also lets players take these people into games and participate in activities like photo sharing.

Users can pull up a player's profile, send an invite and see if they respond. The party chat channel is managed alongside the game and private chat channels, so players can flip back and forth between them.

Xbox fans can also install games to their hard drives now. When playing from an installed game, it will run from the hard drive, which makes load times quicker and cuts down on console noise. It also checks for the original game disc when players have started. Most Xbox 360 games are supported, including those with multi-discs.

Several other new features and upgrades have also been added.

Microsoft said that by the end of this month, Xbox 360 will have sold 25 million Xbox 360 consoles worldwide.