Bill Gates revealed an ace up his sleeve on the eve of the Consumer Electronics Show in Las Vegas to further secure Microsoft's dominance in the household: IPTV on the company's Xbox 360 gaming console.

Internet protocol television, or IPTV, has been a buzzword for the past few years, referring to television content delivered over the Internet, usually via broadband.

As such, the technology also promises familiar online features, including web surfing, e-mail and text-messaging, and VoIP (voice over Internet Protocol) applications for real-time voice chats.

In his keynote discussion of the "digital living room," Microsoft's soon-to-be-retired chairman spoke of the Xbox 360 as a kind of "set top box" that can deliver IPTV to households beginning sometime in 2007.

"Microsoft views TV today like a PC in the '80s: it was somewhat useful, but it could've done its job a lot better," begins Jim Brady, communications manager and spokesperson for Microsoft's IPTV division.

"It wasn't until the introduction of the Internet, that the PC began to truly impact our lives.

"Because of IPTV, we think television is going to change more in the next five years than in its first 50," Brady said.

To Brady, who confirms Bell ExpressVu is a Canadian partner on this ambitious Microsoft initiative, chatting over the Internet while watching a favourite TV show is just the beginning. "The killer application of IPTV is TV."

While television providers (such as Bell) ultimately decide what customers can access, Brady says one IPTV feature is "nearly limitless channels" because there are no temporal and geographic boundaries on the Net."

Imagine a day where not only could you choose from more than 1,000 stations from around the globe, as well as web content such as video shorts posted on websites (YouTube.com, etc.), but you could also create your own 24/7 channel of, say, camcorder footage, and invite your community of family and friends to watch your broadcast.

Brady adds IPTV customers can also expect: many more high-definition channels; the ability to pause, record and rewind live TV using the Xbox 360's hard disk drive; multiple picture-in-picture broadcasts ("perhaps for media junkies who want five news or sports channels on at the same time"); and richer video-on-demand (VOD) features so you can watch virtually any TV show, movie or sports game in history.

"With the push of a button, you can watch an obscure episode of Mr. Ed or Stanley Cup finals from 1980," explains Brady. "People watch more than four hours of TV a day, and IPTV will make the experience a lot richer."

IPTV is promising, but it isn't without its shortcomings, says Michelle Warren, Senior IT Analyst for Partner Research in Toronto.

'There are some concerns expressed by consumers and industry professionals about the video quality," Warren said, "as well as the speed at which the programs will feed into the television."

Brady disagrees. Microsoft's IPTV spokesperson says the company's technology offers "channel zapping," or 300-millisecond channel changing, compared to two- or three-second delays with some of today's digital cable or satellite TV providers. Brady says comparing Microsoft's IPTV to existing digital cable or satellite TV is like comparing broadband to dial-up.

To see if IPTV lives up to its lofty promises, however, Warren says many are adopting a "wait-and-see" attitude.

"While there might be some activity in '07, we don't expect mass adoption of IPTV until '08 or '09."

Brady is a little more optimistic: "People want it and want it now."

Another potential concern, adds Warren, is Internet congestion, because of all the high-definition downloads.

"There's only so much bandwidth available."

Another future application for IPTV is the ability to interact with your favourite television shows in new and exciting ways.

For example, one day we might be watching an episode of Heroes and be able to click on an actor to read more about him in a side panel (perfect for wide-screen televisions).

Or click on Stewie Griffin to purchase related Family Guy merchandise. Or play along with Jeopardy with other virtual contestants from around the globe. This interactivity will also change how companies advertise, Brady predicts.

Hmm, perhaps soon we'll click on that can of Coke on the American Idol judges' table to view commercials and enter contests?

Microsoft isn't the only company offering an IPTV solution, nor will Xbox 360 be the only hardware option available.

"We also have agreements with five other set-top box providers, including Motorola, Thompson and Philips," says Brady.