The Fall 2007 Xbox 360 dashboard update (coming December 4th) will add support for DivX and MP4 playback.
This is great news for Xbox 360 owners who want to watch video encoded in these formats. I’m surprised that Microsoft did this, because these formats compete with Microsoft’s own WMV format. While the benefit to consumers is obvious, I’m not sure what the benefit is to Microsoft. I’m guessing they did this to both improve the “watch your PC’s videos on your Xbox” story, and also to match an existing PS3 feature.