Ah, nothing like the smell of fresh codecs in the morning. Hidden inside the list of new features to be bundled with the spring dashboard update is a handful of new video codecs that will be supported by the Xbox 360. The new codecs are H.264 and MPEG-4 Part 2. What does all this mean? Honesly, we have no idea. Lucky for us, our similarly bewildered kin at Joystiq found an answer. According to the video wiz kids at Red Kawa, "This puts Microsoft at the head of the pack in the Apple TV vs PS3 vs Xbox 360 video battle royale." The 360 will be able to display 1080p H.264 Level 4.1 and H.264 High Profile. This bests Apple TV which is maxed at 720p H.264 Level 3.1 and H.264 Main Profile. As for the PS3, it supports 1080p H.264 but only at H.264 Main Profile. Take that ... probably!
One important note, this does not mean that the Xbox 360 will finally support DivX or Xvid. All your torrenting fantasies will have to wait. Still, this will add some more decent HD video capability to the Xbox 360, and that's always a good thing.
[Via Joystiq. Thanks to the video junkies that sent this in.]