How will Xbox Live work on Windows Phone 7?

Apple may have the iPhone, but the iPhone doesn't have the Xbox. On Monday, Microsoft leveraged its most compelling entertainment asset, the Xbox 360, into the Windows Phone 7 Series. But what does this mean, practically speaking?

(Note: If you don't understand what the heck Windows Phone 7 is, read this first.)

Here's the official word from Microsoft on how WP7 will incorporate Xbox Live.

Games--This hub delivers the first and only official Xbox Live experience on a phone, including Xbox Live games, Spotlight feed, and the ability to see a gamer's avatar, Achievements, and gamer profile. With more than 23 million active members around the world, Xbox Live unlocks a world of friends, games, and entertainment on Xbox 360, and now also on Windows Phone 7 Series.

What we saw in Microsoft's demo Monday fleshes that concept out a bit. There will be a Spotlight section, with your Xbox Live avatar and notice of friends' achievements. And of course, there will be games--"premium titles" with achievements and multiplayer connected to other cell phones, PCs, and Xbox 360 consoles.

Don't let the simple interface fool you. Xbox Live on a phone is more than having your avatar on one more screen because of the three types of games I believe we'll see on Windows Phone 7.

Three games of Windows 7 Phone
The first type of game will be a lot like an iPhone title. Powerful pocket hardware will push impressive graphics (that make the PSP and DS look sad). That's a simple idea that I know all of you can wrap your heads around.

Now, some of these games may be released cross-platform, as Microsoft teased Monday. They'll be what I classify as the second type of gaming on Windows Phone 7--casual, connected titles that allow anyone with a Live account to join in (no matter if they're on a WP7, 360, or PC). You won't see the most beautiful XBLA titles on the phone, of course, but something like Worms? Why not? A buy-it-once, play-it-anywhere model would make this type of game incredibly enticing.

The third type of game--the one that will appeal most to the hard-core gamers--is the Xbox 360 expanded title, something unmentioned by Microsoft but that I see coming a mile away. Imagine a mini game accompaniment to Halo that could unlock more content/resources/anything. Now imagine that such a game is driven by some of the most powerful handheld processors in the world. (You should be picturing something that looks a lot like Call of Duty's Nazi Zombies on the iPhone.) But with the iPhone, Nazi Zombies never leaves your phone--nothing about it will affect your Call of Duty experience on your home console.

This no longer needs to be the case when the game is connected to Live. AAA franchises can make their way to the mobile space with Microsoft in a way that they never could with Apple. Put differently, pocketable games can have console-level repercussions.

Microsoft's mobile trump card
While the iPhone is a treasure trove of pocketable amusements, they're pretty much self-contained entities working in a closed box. Sadly, pretty much the same thing can be said about the Nintendo DS or Sony PSP. Nintendo and Sony have both experimented with connecting their mobile and home platforms on a title-by-title basis (and no doubt, the PSP's early promise of Remote Play still sounds like a revolutionary idea today), but neither company has been all that successful in bridging the gap to create a seamless digital experience.

Plus, let's face it, neither Sony nor Nintendo is relevant in the smartphone business--the present and future of pocket gaming. And while the iPhone is tough competition, it's one phone. Windows Phone 7 Series is a specification (that includes baseline hardware specs and software specs) for many phones that could potentially be on many carriers.

Imagine if Nintendo let any willing manufacturer integrate Wii/DS services. That's essentially what Microsoft is doing here.

But when it really comes down to it, is Microsoft selling us the Xbox 360 experience on cell phones, or is it pitching putting cell phone games on the Xbox 360? And will anyone want to create original, non-ported content for the Windows 7 Phone Series when there are 75 million iPhones and iPod Touches out there already?

Time will tell. Despite what promises to be the most full-featured mobile gaming platform of all time, Microsoft must woo developers to create compelling mobile content before any of this matters.

This story originally appeared on Gizmodo.