TechRepublic: The Xbox experiment has been questioned by the industry, because it's a known money pit for Microsoft and would seem to conflict with many other Microsoft initiatives. The Xbox group has also been allowed to operate outside of the regular corporate structure and culture of Microsoft to a certain extent. And with Windows Phone 7, this strategy may pay off.
Despite being plagued by hardware reliability issues, Xbox 360 has positioned itself as the #2 player above the Sony PS3 in the current crop of console game platforms. If we dismiss the Wii as a "casual" game platform, then the Xbox 360 really has taken the lead with serious gamers. A well-conceptualized and executed mobile gaming experience integrated with Xbox LIVE has potentially significant sway with gamers - and I think that up until the iPhone, catering to gamers was the one thing that most mobile devices were missing.