I found this snippet yesterday:

"TV makers look to Web

The big players in the flat-panel TV sector all highlighted different innovations at CES on Wednesday, but the common theme is the Internet.

Specifically, companies such as LG Electronics, Toshiba and Samsung are all working on new ways to allow consumers to access the Internet through their televisions. The companies have partnered with big online names such as Yahoo Inc., Netflix Inc. and Google Inc.'s YouTube in this effort.

As a press conference sponsored by Samsung, Yahoo Vice President Patrick Barry discussed the company's "Cinematic Internet" concept, which allows users to access the Web through a series of "widgets" using a regular TV remote. The Web portal, which has been looking for new ways to grow its business after suffering market-share loss to Google, also has partnered with LG for services on those TVs.

LG already earned some early buzz by signing a partnership with Netflix that lets users (at least those who are Netflix subscribers) to stream movies without the need for an additional set-top box.

Toshiba did not outline specific partnerships at its own press conference, though Chief Executive Akio Ozaka called the Internet "a growing channel for entertainment" and said his company's TVs would also be supporting Internet applications.

-Dan Gallagher"

The fear of web applications, like the up-and-coming web-based office applications Google is championing (and doing quite well with thusfar -- look up "Web 2.0" and "Google Docs" in your fav search engine, if you're interested), is the primary reason MS entered the game console market to begin with.  Now it looks like even TV makers are going to threaten MS with browsing capability.  This will have a fascinating effect on Microsoft's next console generation, I think.

Not only the console or TV
but all the phone/gadget where u are able to access internet

http://arstechnica.com/journals/apple.ars/2009/01/09/iphone-continues-to-slam-mobile-web-competition

hopefully, MS is struggling at this ...

No. But I wouldn't be suprised if Microsoft partnered up with LG or Samsung (most likely Samsung) for a TV with IE inside of it.

First XBox was released in 2001 and Google Docs was released in 2007. Google was still a tiny company when MS entered console market and even concept of Web 2.0 didn't exist (it was created in 2004). So Web 2.0 had absolutely nothing to do with MS entering game console market. And Google Docs is still far behind MS Office. It still has only around 1% market share and even OpenOffice is still several times more popular than Google Docs.

No one knows the exact reason why Microsoft entered into the home console market, but if you look at what Sony was claiming the PS2 would be in 1998 it could have been thought to be a major threat to the home PC market had they been successful ... Many of the features of the PS2 were dropped and it became the more focused gaming console we remember, but it is possible that Microsoft still saw an eventual risk from the market.

That is probably the least likely choice.  Samsung has too many partnerships and agreements with Sony, most prominantly in the field of LCD TV production.  Frankly I think MS has entirely missed the boat on this one.

Yeah, it seems more likely that they'd partner with a European manufacturer or perhaps Pioneer (or LG as mentioned). Pioneer needs to shift more focus onto LCD's than they do, though, plasma screens have a less than bright immediate future.

Microsoft is probably the last company anyone will team up with when it comes to the internet due to their history of being clueless when it comes to making use of it.

They are great at technology for other people to use to create things for the net, but rubbish at using it themselves.

Chances are better that M$ will eventually buy up Yahoo and let them carry on doing the work.

This looks like a job for Linux, seriously, look at how linux is working it's way into integrated devices, a simple interface with a wii mote like pointer and an on screen keyboard is all you would need and there is your internet TV (the only problem i see is the extra component price)

The only likely partnership would be toshiba.  It is still kind of late in the game to form partnerships.  This technology has been developed for years and just now has the potential roots for installment.