Sony chief executive Andrew House gave the audience the first glimpse of the PS4 at the E3 electronic entertainment trade show in Los Angeles, hailing it as a console of "unparalleled power". It came hours after Microsoft revealed that its new XBox One games console will set gamers back £429 when it launches in November.
The crowd cheered news that the players will not be required to sign in online to play and Sony will not be imposing any new restrictions on how owners trade their PS4 game discs.
Gaming experts said the low price along with news that gamers will not be stopped from buying cheaper pre-owned games has pushed the PS4 ahead of its rivals.
Alex Simmons, UK editor of entertainment website IGN said: "In the battle between the consoles at E3 it looked fairly even until Sony gave Microsoft a bloody nose with its £349 price point for PlayStation 4 and heavily pushing its relationship with gamers - by clearly reinforcing it would allow the sale of pre-owned games and not require a permanent online connection like its rival.
"With both consoles offering similar technical specs - the £80 price difference and ability to buy cheaper pre-owned games might push die-hard Xbox fans to try PlayStation for the first time. It's going to be an exciting Christmas for consumers as these two exciting new machines do battle for the hearts and minds of UK gamers."
The specialist features will also include giving independent gamers the ability to broadcast a live stream of their play, as well as being able to access films, TV shows and music.
Sony will also be developing Cloud technology, allowing owners to play their old games from previous PlayStation models via the internet. Among the first wave of games to be released alongside the console will be Killzone: Shadow Fall, Drive Club and Knack, with at least a further 80 due to be launched in its first year.
Oxford graduate Mr House, from Wales, told the conference that "delivering breakthrough gaming experience" is at the core of the PS4. "We'll continue to prove to you that we have the games, entertainment, value and innovation to give you the very best place to play," he said.