In Friday's demonstration, which drew loud applause, the X-Box showed rich animations of butterflies flocking around a Japanese Koi pond, with lifelike shadows and reflections, and motion that was almost movie-like. Seamus Blackley, a Microsoft developer, said the performance was a tenth of the device's capability.

One surprise, which came at the last minute on Thursday afternoon, was that Microsoft decided to use Intel Corp.'s Pentium III microprocessor instead of a rival chip from Advanced Micro Devices Inc., which wasrumored to be the favorite for months.

Gates said the new box would include a graphics chip from Nvidia Corp. that will operate at a trillion operations per second, far more than any game console today, including the PlayStation 2 just introduced by Sony in Japan.

Many big game developers said they are likely to write software to exploit that power. Peter Molyneux, creator of the forthcoming "Black and White" game from Lionhead Studios in England, said the X-Box would lead to games "that are like the visions in my head."

Bing Gordon, chief creative officer at Electronic Arts Inc., said the X-Box is "great for our industry." He added, "It's the most interesting thing that Microsoft can do now that won't attract the attention of the Justice Department."

Richard Doherty, an analyst at Envisioneering Group in Seaford, NY, said much of what Microsoft had shown had been done before on game machines and PCs. So far, he said, Sony's demonstration of characters with human emotions, such as facialexpressions of joy or sadness on a game character, are superior to what Microsoft has shown.

"We'll have to wait until they (Microsoft) really have something that sets them apart,"he said.