What is it?

It's a total overhaul for the the Xbox 360 operating system. Like upgrading from Windows XP to Vista, but free, and hopefully less pointless. In Microsoft newspeak, it's 'The New Xbox Experience'; in layman's terms, it's a redesign for the menus you see when you're not in a game. "When people turn on their Xbox 360s this fall, they'll get an entirely new interface and dashboard, an entirely new Xbox through the magic of software," says Microsoft's head of Live services, John Schappert. Magical, magical software.

Why is it happening?

Two reasons. Firstly, the old Dashboard was always something of an eyesore (all that garish red, green and purple doesn't match an HDTV in the land), and hasn't proven entirely suitable to all the new features Microsoft has shoved into Xbox Live. Finding a specific demo or downloadable game add-on has become an increasingly nightmarish journey through endless sub-menus. The system needed rethinking from the ground up to reflect how people actually get to and use the stuff they want.

Secondly, Microsoft is hoping to reinvent the 360 as more of a family console than simply the gamer's choice – a reaction, rumour has it, to flagging system sales. The unexpected success of the Wii has put the willies up 'em, so the new Dashboard features cutsey 'Avatars' based transparently on Nintendo's Miis.

As well as that, MS has a raft of casual games up its sleeve – quiz and music fare, ideal to gather a luddite family around at Chrimbo. Says Don Mattrick, senior vice president for the Interactive Entertainment Business at Microsoft, "The new Xbox experience offers more content than you can find from any device that connects to the television. That convergence of entertainment and gaming will bring new people and more families to the category, driving a record year for the games industry."

So what's new?

The most obvious change is the look, throwing out the explosion in a sweet shop design for something a bit more subtle – all silvers and Apple-esque reflections. It's unlikely to be to everyone's tastes, but it certainly doesn't scream "GAMES CONSOLE FOR KILL-CRAZY TEENAGE BOYS" in the way the old one did. It's reorganised too, both to make getting to your content a lot more logical, and to reflect Microsoft's other push – to make the 360 more of an entertainment device than merely a console.

So movies, photos and music now have a much higher profile in the interface, and in the case of the former there's increased focus on paid downloads. "Instead of checking what's on TV this fall, you'll turn on Xbox and ask what's on Live", says Schappert.

Games aren't left out, however – the most exciting part of all this for the traditional 360 audience is that they'll be able to install games to their console's hard drive, which will reduce load time and that damnable racket the DVD drive makes.

What's an Avatar, then?

It's a design-it-yourself mini-you, which your friends (or any strangers you join multiplay with) see as your visual representation in games, as a replacement for the old Gamerpics. Consciously cute, you're not going to be building Chiefy Masters or Death-Beasts, so they may be a little at odds with the Gears of War crowd.

Where they'll really come into their own, though, is in specific games such as Scene It 2, where you actually play as your Avatar. It's potentially the link a more casual audience needs. "Create, share, and have fun with all of your friends... but avatars are just the beginning. The new Xbox is tailored for the living room. Here we are at the community channel – instead of a list of friends, you actually see them.

You can chat with or send messages to your friends, but there's something new: create a Live party, private groups of up to eight people, always connected and chatting as a party," explains Microsoft's John Schappert. There'll also be a lot of ongoing customisability – expect both free and paid clothing downloads, whether it's making your Avatar emo or dressing him in a Grand Theft Auto t-shirt.

So are Gamerpics dead?

No, they're staying around for the time being. They'll even appear on the t-shirts of Avatars if you want.

What if I don't want the new Dashboard?

Tough luck – it should be with us before the year's out (rumour has it that it's due within weeks, even), and if your console's online you'll be essentially forced into downloading it. The old look will be gone forever, though the 'blades' interface will remain in part, as a pull-up mini-menu for commonly-used features while you're mid-game and that sort of thing.

It is good news, though – while it remains to be seen how well the more hardcore gaming audience takes to the Avatars, it certainly makes the Dashboard a much more pleasant place to be.