Microsoft announced yesterday at the E3 2008 briefing a partnership with movie rental service Netflix. Xbox 360 Xbox LIVE Gold members who are also Netflix subscribers can this holiday season instantly stream movies and TV episodes from Netflix.

This pretty huge, as Netflix is the largest online movie rental service in the world. With the exclusive deal Microsoft gives the Xbox 360 a pretty strong media presence in the living room, despite lacking Blu-ray support.
For those with limited broadband connectivity the Xbox 360 Netflix deal is of course not adding to their experience. A disc based movie playback is still important in my opinion.
Later today Sony has its turn to counter the Xbox 360 Netflix deal in their E3 2008 press-conference.

Netflix on Xbox 360 Experience:
From the Netflix Web site, simply add movies and TV episodes to your individual instant Queues. Those choices will be automatically displayed on the TV screen via Xbox 360 and available to watch instantly. Once selected, movies will begin playing in 30 seconds or less. In addition to instantly streaming movies to the TV, Gold members can fast-forward, pause, and rewind—all using either the Xbox 360 Controller or Media Remote. In all, the user interface creates a highly personalized experience that puts viewers in control.
Via this Microsoft announcement.