Microsoft has responded to the release of the PS3 with an upgrade of its Xbox 360. According to Associated Press, the company has announced that its Xbox 360 Elite will ship with a 120-gigabyte hard drive and improved HD video connections. We told you all about it a few days earlier here.

It will sell for $479.99, but those who already own the 20-gigabyte model will be able to buy a snap-on 120-gigabyte hard drive for $179.99.

The player and drive will be on sale in the US by the end of next month.The HDMI connection in the Elite will mean that the Xbox 360 can finally be connected to an HDTV, something that the PS3 does very well.

Microsoft still has not added a high-def DVD player to the console, but consumers can buy an external HD DVD player for the Xbox for $199.99. However generally the release of the new console is seen as Microsoft attempting to position its Xbox into a more entertainment area than simply a games box.

More here.