Both AMD and Intel have been talking about new CPU/GPU combination processors for a long time. When we first heard of the combination processors chipmakers were predicting that they would be the end of the discrete GPU. Whether that will play out remains to be seen, but I doubt it. We would have expected the first CPU/GPU hybrid to come from Intel or AMD, but Microsoft has beaten both to the punch.
Microsoft's Xbox 360 team unveiled the new SoC that will power the coming slim Xbox 360 250GB gaming console. The SoC is built by Global Foundries on the 45nm process and combines the GPU and the CPU onto one chip. The goal Microsoft had in mind was making the construction of the gaming console cheaper in an effort to eek all the profit it could out of the console.
Benefits for the gamer looking to buy a new Xbox 360 is that the SoC is more power efficient and more importantly allows that massive power brick the Xbox 360 uses to go on a diet. Less power needed will also mean the console should run cooler, which is a big deal if you cram your console into an entertainment center. Microsoft apparently had to add in a system that reduced the performance of the SoC to keep the new console inline performance wise with older systems. The new SoC uses 60% less power than the original console that debuted back in 2005.