By announcing the HD-DVD drive add-on for the Xbox360, Microsoft, quite surprisingly, said that the Xbox360 will support 1080p games with a simple software update. Furthermore, the console will upscale your regular DVDs to 720p resolution, the same way it does with regular Xbox games played on the 360. Microsoft says there will still be no hardware HDMI support.

Coupled with the cheap price tag on the HD-DVD add-on ($165 in Japan), plus the fact that the Xbox360 will support 1080p, this is a serious threat to Sony, who promoted their PS3 as the only console supporting “true HD”.

Read (Joystiq)