Information about Microsoft working on 3D avatars for their Xbox Live platform leaked. The image and some description of the Xbox Avatars was found on a survey site.

The Wii with its Mii characters has had 3D characters that players can customize and associate with from the get go.
The Xbox characters are supposed to also be highly customizable and also playable in various games.
As mentioned in this story Microsoft needs to do something to make the Xbox 360 more attractive again. If the Xbox Mii's will have what it takes to compete with Sony's Playstation Home is questionable at this point.
Information leaked via Xbox 360 Fanboy. See also Kotaku.