According to the prize sponsors, a "standalone jury of independent game creators" will apparently collaborate with Microsoft to "identify a shortlist" -- a list which will then be considered for the XBLA prize. If the winner so chooses, his/her project will then be offered funding for development across Xbox 360, Windows Phone 7, and Windows, as well as given the opportunity to employ Microsoft's bevy of testing, marketing, and usability support.
Alongside today's prize announcement, Microsoft head of first-party publishing Ted Woolsey also revealed that Microsoft invests upward of $20 million annually on XBLA titles, and offered support for the multi-year partnership with the IGF. "The independent development scene wouldn't be nearly as robust as it is today without the exposure provided by the IGF. We look forward to working with the IGF and having a window into to the huge array of independent games that are submitted every year so that we can continue to find the best games to share with our customers."