The new Zune HD will come with a multi-touch screen. (Microsoft image)

The "HD" in the upcoming Zune HD stands not just for high-definition video but also for high-definition radio, Microsoft said last night as it confirmed plans for a new version of its portable media player. The device, to be available this fall, will come with an HD Radio receiver, HD video output, a touch screen, wifi and a web browser.

At the same time, Microsoft said it will integrate the Zune video service into Xbox Live, creating a tighter connection between the company's video-game and portable media systems. The company says Zune "will occupy the first slot within the Xbox user interface in the Xbox LIVE Video Marketplace." Microsoft promises more details next week at the E3 video-game convention.

The connection to the Xbox 360 is part of Microsoft's effort to expand the Zune brand beyond the device itself. But the confirmation of the Zune HD also shows that Microsoft isn't giving up on the Zune hardware, at least not yet.

The built-in FM radio receiver in existing Zunes has been one competitive difference for Microsoft over Apple's iPods. The HD Radio feature seems like a natural addition that could expand the appeal of the Zune when it comes out.

The touch screen and web browser were necessary additions to keep pace with the iPod touch. But Apple still has the advantage of the popular App Store, which creates a strong connection between the iPod touch and the iPhone. Despite speculation about a "Zune Phone," it might make more sense for Microsoft to create a tighter connection between Windows Mobile devices and the Zune, essentially trying to mirror the effect of the iPod-iPhone combination.

Microsoft isn't yet announcing the Zune HD's pricing or configuration. From the news release, here's how Microsoft is pitching the new features.

Zune HD comes with a built-in HD Radio receiver so users can listen to higher-quality sound than traditional radio on the go. Users also will have access to the additional song and artist data broadcast by HD Radio stations as well as additional channels from their favorite stations multicasting in HD. If you don’t like the song playing on your station’s HD channel, switch to its HD2 or HD3 channels for additional programming.

The bright OLED touch screen interface allows users to flip through music, movies and other content with ease, and the 16:9 widescreen format display (480x272 resolution) offers a premium viewing experience on the go.

The HD-compatible output lets Zune HD customers playback supported HD video files from the device through a premium high-definition multimedia interface (HDMI) audiovisual docking station (sold separately) direct to an HD TV in 720p. [Supported 720p HD video files play on the device, downscaled to fit the screen at 480 x 272 — not HD resolution. Zune HD and AV Dock, and an HDTV (all sold separately) are required to view video at HD resolution.]

Zune HD will include a full-screen Internet browser optimized for multitouch functionality.

Zune HD is Wi-Fi enabled, allowing for instant streaming to the device from the more than 5 million-track Zune music store.

The devices look slick. Will this be a tipping point in Zune's competition with the iPod, or a futile parting shot?