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Seen by many as a bid to rival Apple, Microsoft's "Smart Glass" will allow Xbox fans to use their smartphone or tablet to remotely control games and see real-time information about TV shows as they watch.
Speaking at the E3 2012 expo, Don Mattrick from Xbox said: "Every TV becomes smart next-generation TV. This is a breakthrough in entertainment that makes all your devices work together.
"Xbox Smart Glass works with TV, phone and tablet."
By way of demonstration, Xbox showed an episode of Game of Thrones, during which users could see a map of the show's locations changing as the programme progressed.
As well as the Smart Glass breakthrough, Microsoft revealed a new version of Internet Explorer due to be released for the Xbox, allowing tech fans to use a phone as a trackpad to navigate the web.
Also on the cards is a music service for the console called Xbox Music. Set to launch later this year, the service means users can download and listen to music through their TV, smartphone or tablet.
Xbox Smart Glass is due to launch later this year and it is expected to be free for console owners.
What do you think? Can Microsoft's 'next-generation TV' rival the likes of Apple and Google? Leave your comments below...