Graphics chip underdog ATI Technologies said Thursday it has signed a contract with Microsoft to produce components for future versions of the Xbox game console, beating out market leader Nvidia.

ATI said it entered a technology agreement with Microsoft to develop "custom, leading-edge graphics technologies" for the console.

This deal leaves me with two interrogants: What will happen with ATI's deal with Nintendo, or what will power Nintendo's next generation console. And the second, how backwards compatible will X-Box 2 be? Would sound simple since any chip ATI or NVIDIA develop are PC based however many X-Box games have used NVIDIA-only optimizations... but I guess they still have a lot of time to work on it anyway.