The cat's out of the bag on the Zune HD, with Microsoft confirming the handheld media device's existence and its intent to go touchscreen-to-touchscreen with the iPod Touch this fall. Our technomigos at Engadget have full details on the new Zune -- including word that Microsoft is doing away with the current Xbox Live video marketplace in favor of the Zune marketplace.

How this will work exactly won't be fully revealed until E3, where Microsoft promises that attendees will learn "how Zune integrates into Xbox LIVE creating a game-changing entertainment experience." This integration could very well be related to the hinted-at 360-Zune team-up we posted about last December.

Still, the announcement does bring up some interesting questions in the meantime. Chiefly among them: Will video content purchased on one device be playable on the other and vice-versa? Microsoft isn't saying, although that would make perfect sense. Also, the Zune marketplace offers an extensive catalog of downloadable songs -- could this be an indication of an iTunes-like music service debuting for 360? Microsoft's press conference has just become more unpredictable.

Update: The Guardian reports that Microsoft told it to expect movie, TV and music downloads via the Zune marketplace on 360. In addition, a subscription service like (or one and the same to) Zune Pass will likely be offered to Live users, allowing them unlimited song playback and 10 song downloads a month for a set fee. Final details are expected to be announced at next week's E3.

This article was originally published on Joystiq.

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