Part of the idea behind the Xbox is to establish MS as something fun - other than just this corporate PC monster. Check.
It establishes the MS brand with younger consumers. Check.
It encourages use of MS-branded web entities through MSN log-ins and Windows Media Player. Check (though perhaps less thoroughly than they might hope).
Ideally it makes money. Check (now - though not lifetime quite yet).
It's a breeding ground for new software ideas that can be expanded to elsewhere. Natal is an example of this. They hope to expand the tech elsewhere.
I'd think MS is pretty happy with the Xbox's performance - especially this gen. They have to be thrilled at how much market share and brand awareness they have claimed compared to the last gen.
Can't we all just get along and play our games in peace?
