Interoperability: I kinda like that sound of that word, makes me feel smart saying it. As fancy as it sounds, it really just means you can plug multimedia devices into the 360 and stream the contest straight to your TV.
Microsoft famously touted this by showing the 360 playing stuff off of the Playstation Portable. Talk about tea-bagging the competition. To do this, or stream data from any device, you just plug it in to one of the two hidden USB ports on the front of the 360 and hop on over to your Media menu. When you bring up the Media menu you’ll see your device listed along with the 360’s hard drive and your computer, just select it and get to streaming.
In the case of the Playstation Portable, you have to go into your PSP and select USB Connect after plugging the two devices together and then it shows up in the menu as a “portable device.” Once you select that you get dropped in to the PSP’s goofy folders where you can browse, look and listen to your heart’s content.