At the Tokyo Game Show today Microsoft revealed that later this year when it releases its fall software update Xbox 360 consoles will automatically be enabled for 1080p resolution (1920 x 1080) game and movie content.

1080p is the highest resolution available on the market today and most HDTV sets still lack this capability, although more and more are starting to include it. It's also a highly touted feature of Sony's PlayStation 3, as Sony proudly showed off its silky smooth Gran Turismo HD in 1080p at E3 earlier this year.

It's not clear how many PS3 titles will initially support this resolution, nor is it clear what upcoming Xbox 360 games might be designed for it, but the fact that Microsoft is able to include 1080p this fall takes away one of the PS3's advantages over the 360, and that's surely one of the main reasons for including it in the software update.

1080p support will also come in handy for Microsoft's upcoming HD DVD player for the 360, which the company has now priced and dated in Japan. The player will launch across the Pacific on November 17 for an estimated retail price of ¥19,800 (about $169) and will come with an Xbox 360 Universal Media Remote.

"Xbox 360 and the HD DVD Player together deliver the most powerful and affordable games and movie system for Japanese consumers," said Peter Moore, corporate vice president of the Interactive Entertainment Business in the Entertainment and Devices Division at Microsoft. "The freedom to choose their entertainment experiences is extremely important for consumers as they enter the next generation."

Microsoft has yet to announce its HD DVD plans for North America, although that information is likely coming soon. The company has promised that it will hit the market on time for the holidays and many have guessed that it will come with a $199 price tag.

[UPDATE] To clear up any confusion about exactly what the Xbox 360 does or does not do with 1080p resolution, we got in touch with Microsoft to find out more. Those of you who always wanted the Xbox 360 to function as an upconverting DVD player just got your wish. Here's the lowdown:

How many games can we expect to support this resolution?

1080p support for games will depend on the developers programming them in this resolution.

For games that are designed for 720p/1080i will the Xbox 360 upconvert to 1080p for those people with 1080p TVs?

Yes, if developed, the Xbox 360 will support playback of 1080p games and all existing Xbox 360 titles can be upscaled to 1080p.

Will the 360 upconvert standard video content to 1080p or will 1080p versions of videos be offered alongside 480p and 720p on Marketplace?

We have made no announcements about availability of 1080p content on Marketplace.

Does this have any effect on standard DVD playback? What about the HD DVD player?

With the Fall update standard DVDs will be able to be upscaled to 1080p.

[Note: The MS rep also mentioned that if you don't have a 1080p TV set, the 360 will upconvert the DVDs to 720p/1080i.]