Microsoft Chairman Bill Gates on Sunday showed off a hatbox-shaped computer for the living room and a video game machine that plays Internet TV, arguing years of hype about a world of connected technology finally was coming true.

Computers will come in all shapes and sizes as Microsoft's long-awaited new Windows Vista reaches consumers later this month, Gates said as he opened the annual Consumer Electronics Show in Las Vegas, the largest of its kind in the United States.

He also said Microsoft would offer an Xbox 360 game console that doubles as a set-top box for its fledgling Internet Protocol TV (IPTV) service, which delivers high-quality video over Internet networks.

The Microsoft co-founder highlighted Vista's ability to handle various forms of digital media on an eye-catching, round living room computer, shaped like a sleek hat box, from Japan's Sony and a touch-screen desktop PC from Hewlett-Packard.

The new PCs running Windows Vista will be released to the public on January 30.

Gates' annual speech at the technology industry's premier trade show comes at a time when the world's largest software maker looks to extend beyond its core -- and highly profitable -- PC business into consumer electronics and gaming while closing the gap on Internet rivals like Google.

Gates also took the wraps off Windows Home Server, software due out later this year to provide homes a central location to store music, photos, videos and other digital content. Users will also be able to access that content away from home, using a Microsoft Windows Live Web address.

In the past, Microsoft's server business has targeted large corporations or organizations. This represents the first server software aimed at consumers. Microsoft said HP will launch a home server product in 2007.

Gates said years of talk and hype about convergence will finally be realized with its Xbox 360 set-top box for IPTV users. IPTV carriers, such as AT&T , will be able to offer the new set-top box in the 2007 holiday season.

"Finally we know what we were talking about," he said.

The IPTV Xbox 360 set-top box would allow users to not only play games, but also grab videos from any PC in the home and display it on the living room television, download high-definition video, and have a normal TV viewing on par -- if not better -- than cable or satellite.

"Our goal is to make entertainment more personal, more interactive and more social," Microsoft devices division president Robbie Bach said at the news conference.