I think it runs on WinCE and exposes the DirectX API to the games. Maybe I'm getting confused with the Phantom console. Although I heard someone on a newsgroup forum say that it doesn't have Windows running behind it so potentially the games would be faster than a similarly specced PC. Wait, I think its got Windows Xp, embedded edition.
I imagine the licensing is much, much cheaper for WinCE, or WinXP embedded than fully blown Windows. As far as MS is concerned its all good as they win any way you look at it. You know, I'm a little surprised that Apple haven't released a really easy peasy set top box yet that integrates with your IPod or a successor to iPod which'll stream movies.
Actually, come to think of it, one advantage KMOS now has with OS4 is that they have probably paid less for OS4 than for continuing to license from MS. A set top box seems the only likely reason KMOS bought OS4. We were already going to get it on a desktop, so why did they buy in otherwise unless its to gain them some sort of advantage in a different area? Garry Hare's background is streaming video and internet delivery mechanisms. The very technology that could revolutionise the industry and put Amiga back on the road, if not at the head of the pack, in this area.