Microsoft has announced the latest version of the Windows Phone 7 OS, which will include a variety of Xbox Live features as part of the package. Avatars, achievements and games will be part of the latest version of the OS, which was formally announced at the 2010 Mobile World Congress being held in Barcelona.

While the new smartphone devices to offer these features will not be available until around the holiday season of 2010, the development will in many ways merge the Zune, Xbox Live and Windows Mobile experience into one device. The operating system will be much more user friendly and offer extensive touch screen support, but from what we hear the interface is still in a state of flux and it is expected that it will continue to evolve over time.

One of the most interesting features is that the icons on the phone are able to offer dynamic or real-time content that is directly updated, as well as the standard static icons. Icons can offer animation as well, and leave room for some interesting development possibilities to tweak the user interface in many different ways.

A variety of carriers are already on board to carry the new phones once they are released, including AT&T, Deutsche Telekom AG, Orange, SFR, Sprint, Telecom Italia, Telefonica, Telstra, T-Mobile USA, Verizon and Vodafone, with others expected to be added at a later time.

New smartphones to feature the Windows Phone 7 Series OS will include offerings from Dell, Garmin-Asus, HTC, HP, LG, Samsung, Sony Ericsson, Toshiba and Qualcomm. While specifics on the actual devices were not yet announced, it is expected that more specifics will be coming in the weeks ahead as new devices get closer to launch this holiday season.

Microsoft did not announce a Microsoft branded “Zune Phone” offering as some expected. If the company is planning something, they have yet to announce any specifics about doing so. Our sources suggest that the company will want to see where things are with third party developers before deciding if they will take the plunge with a branded offering.

The Xbox Live features appear to be very unique that could be used to tie Xbox 360 or PC games to the mobile Xbox Live itself. For example, a mini-game on the phone that is related to a title on the 360 or PC could offer a reward of extra gear within the 360/PC game for completing the mini-game on the phone platform. The possibilities are endless on how 360/PC versions of Xbox Live could be tied into the Xbox Live mobile, according to our sources.

The tie-in between Xbox Live on the 360/PC and the mobile smartphone version could attract a lot of hardcore 360/PC players. If successful, many of these players might switch from the current phone that they are using to a Windows Phone 7 Series model just for the mobile Xbox Live support. No plans were announced to offer the mobile Xbox Live applications or access on any platform beyond Windows Phone 7 Series devices.