According to Todd Bishop's Blog :

• It would have wireless Internet capabilities, for downloading tracks directly to the device, according to Bloomberg News.
• The device could be launched by Christmas, although the company
  reportedly hadn't yet briefed key retailers as of last week, casting
  some doubt on that schedule, according to The New York Times.
• Led by Xbox executive J Allard, the project, code-named "Argo,"
  reflects a broader strategy that would extend the Xbox brand into a
  variety of digital-media products, according to The Seattle Times.
• Microsoft may be considering giving people free alternative copies of
  tracks they've purchased from the iTunes Music Store, for use with the
  Microsoft device, to help convert iPod users, according to some reports.
• The final product name may be the "Zune," according to Gizmodo.
• And the device may look like this, according to Engadget.

source: quoted from the Tod Bishop's blog