Microsoft's Xbox Live has existed since 2002. How will Sony, who has never had a dedicated and successful online program in the console space -- the PS2's online was a total free for all -- compete with Microsoft's nearly four-year lead in the online console gaming service sphere?

They'll use Xfire, that's how (the image to the right is a mock-up).
http://media.1up.com/media?id=3024826

By incorporating an existing service into their own PlayStation Network Platform (PNP), Sony hopes to circumvent existing problems in the console space that Microsoft has had to sort out and in using Xfire -- a company with an established messaging, matchmaking and gaming client -- Sony hopes to narrow the four-year gap in online gaming services that Microsoft currently enjoys (Xfire has been around since 2002).

In a transcript of Viacom's Q2 earning's report conference call a deal between Sony and Xfire was revealed:

Importantly, Xfire just signed a deal with Sony to create a version of their platform for the new PS3, which will now enable Xfire to extend its reach further into the huge console gaming market.

Although Sony and Xfire offered no further comments or details about the PS3 and Xfire connection, neither company denied the connection.

Testing of the Xfire client for PS3 appears to already be underway, with PS3-exclusive launch title Untold Legends: Dark Kingdom appearing in the supported software list on the PC Xfire client's .ini file.

Months ago, Sony's Computer Entertainment chief Ken Kutaragi indicated that PS3's online service would likely be free:

We don't charge for the basic functions of the network like matching services. Things like that are taken for granted on a PC, aren't they? There's the feeling of why a game console gets to charge for a service that's normal on a PC. So, we just made the basic services available, and based our business on the contents.

How will Xfire function on PS3? Details are sparse, but it's a safe bet that the some of the features offered on Xfire's PC implementation may carry over to the PS3 version of the software. What follows is a look at what Xfire offers PC users and what PS3 users may have to look forward to.

Friend Tracker
Like Xbox Live allows users to manage their Friend's lists, Xfire also allows users to track friends, seeing what they are playing and what they have been playing (and for how long).

One-Click Join
Similar to how Xbox Live allows users to click on their name and 'Join' the game if it's available, Xfire lets users do the same thing. If a friend is playing a game you want to, there's no need to input your IP address or server information, Xfire takes care of it for you. Safe to assume that the PS3 implementation of Xfire will only be the touch of a button (an 'X' perhaps) away from joining users from your Friend Tracker.

Server Browser
This feature allows users to see the variety of servers available for different games. The most useful part here, is the ability to sort between favorite maps, or your friend's favorite maps and gametypes. Will we be able to sort out Resistance: Fall of Man gametypes based on which servers are hosting our favorite map?

Xfire In-Game (IM While You Play) with Voice Chat
Obviously, in-game IM would be a bit more utilitarian on a PC, where all users have a keyboard, but Xfire's PS3 implementation may see use of a keyboard (the open-ended online platform is ripe for MMO development). Without a keyboard, Xfire and PS3 will provide a way of their own to communicate with users (perhaps entering letters via the controller like on Xbox Live). In addition to text communication, Xfire supports voice chat -- expect a version of voice chat to be included in whatever PS3 plans for online.

File & Patch Downloads
When there's an update for a game on Xbox Live, Microsoft automatically detects it when the game is booted up and prompts users to snag the download. Optional downloads (like marketplace transactions) are shown on the marketplace, will Xfire's file/patch download systems be a gateway to whatever form of marketplace Sony conjures up?

Profiles with Automatic Stats
Xfire exports an .xml feed of your stats (what games you play, how long you play them for) -- just like Xbox Live. Via the official site: "They're (the stats) on your profile and Miniprofile, which can be embedded anywhere on the web."

In addition to partnering with a software client that could potentially offer much of the functionality of Xbox Live, Sony's Xfire-powered PNP also serves as a second coup -- it strikes at the unified front Microsoft hopes to create with its Live Anywhere initiative. That program, the synergizing of Xbox Live and PC gamers, is something Sony could replicate if the PS3's version of Xfire interacts with the PC version of the program. But, will the games play together? And if PS3 and PC gamers can play together and Xbox 360 and PC gamers can play together, does cross platform gaming become even more of a reality?