How this will work exactly won't be fully revealed until E3, where Microsoft promises that attendees will learn "how Zune integrates into Xbox LIVE creating a game-changing entertainment experience." This integration could very well be related to the hinted-at 360-Zune team-up we posted about last December.
Still, the announcement does bring up some interesting questions in the meantime. Chiefly among them: Will video content purchased on one device be playable on the other and vice-versa? Microsoft isn't saying, although that would make perfect sense. Also, the Zune marketplace offers an extensive catalog of downloadable songs -- could this be an indication of an iTunes-like music service debuting for 360? Microsoft's press conference has just become more unpredictable.
Update: The Guardian reports that Microsoft told it to expect movie, TV and music downloads via the Zune marketplace on 360. In addition, a subscription service like (or one and the same to) Zune Pass will likely be offered to Live users, allowing them unlimited song playback and 10 song downloads a month for a set fee. Final details are expected to be announced at next week's E3.