Normally I'm against do-everything devices, but IMO this is a stroke of genius.
Everything about operating a TV today is pure pain. The centerpiece here is an obtuse, 100-button remote that no one fully knows how to use. You use this remote to get at the "mode switcher", which changes you from TV watching mode, to bluray watching mode, to gaming mode, to whatever else you do with your TV.
It's painful, not to mention a lot of people have receivers to handle the audio portion of this. It's like a really, really bad KVM.
The only way to eliminate that pain was to take over all of the above responsibilities, and MS just did that. With any luck this means you will basically never have to touch your TV's god-awful remote ever again, and the terms "Video 1", "Video 2", and "TV" will cease to have any meaning.