Today Microsoft announced the Zune HD, which is basically an Apple iTouch competitor. It's going to have multitouch web browsing and interface, and HD radio and HD output through a separate docking station.

I really don't see how this is going to compete with the iTouch unless they do something incredibly drastic. If anything all those cool apps that make the Apple iTouch and iPhone so awesome is reason enough not to go with anything else.

Its said we will find out more about the unit at E3.