ATI's H.264 HD DVD video decoder will be used by Microsoft to allow its Xbox 360 to play HD DVDs, the two companies announced today.

No great surprise there, perhaps - it's well known the Microsoft console has an ATI GPU on board - the R500 - and it's capable of running the same video processing algorithms through its pixel shader pipelines as the company's desktop chips.

No, today's announcement isn't about technology, but marketing. Microsoft is joining with other HD DVD backers to fund a $150m marketing drive for the next-generation optical disc format. Since Microsoft will be promoting the format with Xbox 360, and since the console contains ATI chippery, ATI understandably wants to get in on the act.

It helps, too, that just as HD DVD is competing with Blu-ray, and Microsoft (Xbox 360) is competing with Sony (PS3), so ATI's arch-rival, Nvidia, is providing the graphics for Sony's console. The battle lines are clearly draw: HD DVD vs Blu-ray; Microsoft vs Sony; Xbox 360 vs PS3; ATI vs Nvidia. Let each's fanboys line up accordingly.