In a special roundtable we attended with Microsoft's Shane Kim, the Corporate VP made it absolutely clear: Microsoft will not be using its Xbox Live Avatars as a stepping stone to create a virtual world like Sony's PlayStation Home.

"We should be really clear. We have no plans to create our own 'Home' type of functionality. Our focus in the online space – and we talked a lot about this when Sony announced plans for Home – has always been about building on the foundation we created when we started Xbox Live," he said. "We're continuing to add services and features and functionality that we believe our customers care more about."

Kim noted that Avatars is a "natural evolution" of customers being able to personalize their experience on Xbox Live and Xbox 360. He added, perhaps addressing suggestions that Microsoft is copying Nintendo's Miis, that the concept of avatars in general has been around for a long while and was certainly not invented by Nintendo or Microsoft. Kim also said that the Xbox team has been working with developer Rare for "quite some time" on Xbox Live Avatars. "It's not something you can put together overnight," he said.