Microsoft explained that existing game titles (software) will need to be recompiled before it can be run on the new console.

Hardware incompatibility seems ti be the problem here, since the current Xbox uses an Intel processor, but the 360 will use IBM's PowerPC architecture, while NVIDIA's graphics solution is being replaced with an ATI one.

The solution Microsoft has reached is apparently to recompiled current-gen Xbox games so that they can be played on the 360. First on the list, it says, are the best-selling Halo titles.

The news has raised more questions than it answers, however, as it suggests that gamers may need to purchase titles they already own in order to play them on an Xbox 360 - and almost certainly means that only a sub-set of Xbox games will ever be playable on the new console.

Sony and Nintendo have already confirmed that their next-gen consoles - the PS3 and Revolution - will play all the games in their respective back catalogues, offering consumers a huge choice of titles at launch.