SONY's countering with 3D.
They also have MOVE and GT5.
The X360 price cut was inevitable though.
I think the key to cheap X360 is getting a lot of people to use Natal. If done properly, people will use it for stuff like watching movies etc. People will love controller less menus and stuff apart from gaming.
I see Natal as MS way of attracting casual gamers who enjoy the Wii.
It will be interesting. Can't wait to see what they release.