Saw this on GamerTV on Bravo when they did a coverage of the CES (Consumer Electronics Show). The guy demonstrating said it plugs into DSL phoneline & works alongside your XboxLive. Looked like a small black box sat on top of the 360.

He demonstrated the channel hopping PIP (picture in picture) feature where you could view what was on other channels before you decided to change the channel. Also while watching TV you can bring up your Xbox menu on the left hand side & talk to your friends through voice, send/recieve messages/invites or launch your games.

Basically its cable TV without having to have cable

Should be released end of 2007 unsure on price or subscription costs but will update when I find out more.

Video Demo
Shorter Demo