On the evening of Nov. 21, in a hangar in California's Mojave desert, more than 2,000 game fans eagerly waited to get their hands on the brand new Xbox 360.

At precisely 9 p.m. that night, three trucks rolled into the hangar, and when their doors opened, the next-generation console era had begun.

Microsoft, of course, wasn't the only company with next-gen in mind this year. Sony plans to launch its much-hyped PlayStation 3 next spring in Japan. Nintendo's Revolution is also slated for a 2006 release.

Next-gen consoles--with their high-definition graphics and online multiplayer capabilities--have graphics and multimedia purists salivating. Still, this year's E3--the video game industry's monster convention in L.A.--was marked by fear that the incredible consoles won't amount to much if the games that are available don't live up to the next-gen promise.

And the new Xbox--which launched with 18 solid but unspectacular games and sold out immediately at stores in the U.S. and Canada--got hit with bad news as reports spread that at least some of the machines were defective. Microsoft said the problems were few and far between and promised quick repairs or replacements, but a seed of doubt and anger was already planted.

Game enthusiasts cheered in March, when Sony set the handheld video game console world on its ear with the release of its PlayStation Portable, or PSP. With its ability to play movies as well as sophisticated video games, the device quickly sold out in stores nationwide.

But the PSP also attracted hackers intent on defeating its software that prohibited owners from running homebrew applications like a PDF reader or an FTP client. Sony quickly updated the device's firmware, but the hackers lost no time in defeating those protections as well. Sony turned around with a new version of the firmware, and the cycle continued.

Taking center stage as the year progressed was Rockstar Games, publisher of "Grand Theft Auto: San Andreas" after it was revealed that an easily downloadable modification to the best-selling title added explicitly sexual scenes to the game.

The so-called "Hot Coffee" scandal--named after the modification itself--prompted the video game industry's governing body, the Entertainment Software Ratings Board, to change the GTA: San Andreas' rating from M (mature) to AO (adults only).

The change had real consequences for the publisher, as many large retailers, such as Wal-Mart, won't carry AO-rated games.

At the same time, the Hot Coffee scandal, as well as a general reaction to violence in video games, reached the halls of Congress, and of state legislatures across the country.

New York Democratic Sen. Hillary Clinton slammed the video game industry for allowing explicit content to get into children's hands, and several states passed laws banning the sale of violent or extreme games to minors. While it's not clear whether those laws are constitutional, there's no doubt politicians picked up on the issue as a way to make hay with voters.

--Daniel Terdiman

2005 Highlights

The Xbox 360 rush is on

Microsoft kicks off the Xbox 360 era at a special launch event in California's Mojave desert.

Reality check on Xbox 360

It didn't take long for some gamers to start griping about the new consoles. But just how widespread are the problems?

Will small publishers still have game?

With rising development costs, the little guys are facing tough choices when it comes to new consoles.

Senators target 'graphic' video games

Clinton and Lieberman call for a crackdown on sex and violence in video games, while another senator vows to target "indecency."

Sex content leads to adult rating for 'Theft'

Following heated controversy over racy hidden images, "Grand Theft Auto: San Andreas" will now bear an adults-only rating.

ESRB to investigate 'San Andreas' sex content

Ratings board will look into claims that explicit minigames are hidden in "Grand Theft Auto: San Andreas" code.

Sony spills PlayStation 3's guts

On a cloudy Los Angeles film studio lot, long-awaited details of new gaming console follow news of Microsoft's rival Xbox 360.

Game fans clamor for PSP

Hundreds wait in line for hours to snag one of Sony's new portable game players.

Trojan sucks life from PSPs

Malicious software claims to undo Sony's patch attempt to deter customizers, but turns game player into a useless "brick" instead.

ESA will sue to block Michigan game law

Video game industry's lobbying arm plans to file suit against the governor over legislation banning the sale of violent games.

Illinois seeks to restrict violent video games

Proposed bill makes Illinois latest state to tackle growing concern over increasingly graphic games.

Nintendo's NES game console turns 20

It's been 20 years since the NES first hit American shelves. And today, Mario's still going strong.

'Dungeons & Dragons' goes virtual

Call it one for the old-timers. A virtual version of D&D hopes to stoke the nostalgia and creativity of the original role-playing game.

EA invests big in the future

The game giant's recent licensing deals may be paying off, even as it fights off tough competition.

Behind the headlines

• Man pays $100,000 for virtual resort
• 'Graveyard Games' makes lively debut in Bay Area
• Blurring the lines between games and life
• New gateway to multiple virtual worlds?
• Attention deficit disorder? Try video games
• Making the virtual world a better place
• Getting girls in the game
• The serious side of games
• Game makers see workplace changes
• For gamers, there's a 'There' there