Microsoft has chosen what it sees as the next-generation in PC form factors - a computer the size and shape of a coffee table with a flat, touchscreen display - as the third major product it has designed and is branding for the consumer electronics market.

The company has revealed five-year old project 'Milan', a computer that uses wireless auto sync and touchscreen technology to allow users and devices to interact with files and applications using a flat, table-top screen. The company designed and is branding the computer, as it did with consumer electronics products like the Xbox console and Zune MP3 player.

To accompany Milan, Microsoft has renamed as Surface Computing a team within its Entertainment and Devices Division previously called New Consumer Products. General Manager Pete Thompson leads the group, which has worked quietly in new projects to give computers and other devices more human interfaces.

"The idea is how we start to blur the lines between the digital world and the physical world," Thompson said. The team's projects have been hush-hush, which is why Microsoft revealed the true name of the group now. Milan is the group's first commercial product.

As demonstrated by Thompson and his team, Milan needs no wires to sync with devices and users don't need a mouse to communicate with it. By placing hands on a 30in horizontal display, users can move around photos or videos, and even flip them over or display them from different angles. Bluetooth-enabled devices such as mobile phones, wireless cameras and Microsoft's Zune can also communicate directly with Milan by being placed on the screen. Applications will automatically launch and open the correct file library, such as music or photos, depending on the device.

The prototype the company showed has a black body with a 30in horizontal display. It is 22in in height, 21in in depth and 42in in length. The computer runs a version of Windows Vista with the Microsoft Surface custom infrastructure that allows for the touchscreen and auto sync capabilities, but the operating system is transparent to end users.

Before introducing Milan to a broad consumer market, Microsoft is targeting market segments such as leisure, hospitality and retail environments. The product won't be offered in full production until next year, but Milan's first customers - Harrah's Entertainment, Starwood Hotels and Resorts Worldwide and T-Mobile USA should deploy the first computers by the end of the year.

Harrah's is developing custom applications for about 50 Milan units it ordered, and expects to have as many of these in production as possible by the end of the year, said Tim Stanley, Harrah's chief information officer. The customers' initial approach for Milan is that “Microsoft provides the computer guts, including the operating system, some basic applications for photos, music and a software development kit (SDK), and customers build their own applications,” Stanley said.

Stanley, a former Microsoft employee, saw an early Milan version 18 months ago and was intrigued by it. Although Harrah's is not a Microsoft shop, he thought Milan would provide a "platform to do some new and innovative things for our customers."

Harrah's is developing a mapping program for Milan that links to its Total Rewards customer VIP program, Stanley said. At VIP lounges, members will be able to place their Total Rewards cards on the screen and be identified by the kiosk. They will be able to browse through interactive maps that show amenities, entertainment and restaurants from Harrah's eight properties in Las Vegas - where Harrah's will first launch Milan - and order tickets or make restaurant reservations on the kiosk.

Harrah's is also working on other applications, including one that will let customers in VIP areas of popular nightspots, such as Pure Nightclub at Harrah's property Caesar's Palace, order beverages or send beverages to other patrons.

"T-Mobile plans to deploy Milan kiosks to provide customer service in 1,200 of its retail stores," said Jeffrey Gattis, director of product management for Microsoft's Surface Computing group. Customers can take the handset model they want off the shelf, place it on Milan and use the touchscreen to configure their desired services and applications. They can then take that model to a customer service agent.

"Microsoft said it will release an SDK for third-party developers once the computers catch on in the market. And while the company initially plans to offer the Milan hardware, manufactured by a third-party contractor, Microsoft said it might let hardware OEMs build and brand Milan computers in the future.

That move will be necessary for Milan's long-term success, said Matt Rosoff, an analyst with Directions on Microsoft, "To turn it into a real business they have to take a very Microsoft approach and OEM the hardware out," he said.

"It will be some time before consumers will want to put in their living rooms the rather bulky prototype Microsoft is demonstrating, though this is where Microsoft is going with Milan," said David Dauod, an analyst with IDC.

"Ultimately, Microsoft's goal is to see the product become something like what used to be a plasma TV," Dauod said. "As awareness grows and prices go down, [it will be more ubiquitous]. ... Ultimately, mainstream will become something you will see in the mid- to long-term."

Microsoft said Milan's price will be between $5,000 (£2,527) to $10,000 (£5,055) per unit, which is too expensive for consumers in the near term," he said. Microsoft hasn't disclosed its manufacturing costs, but Dauod guesses that Microsoft does not expect a profit from Milan in the near term.

"More importantly, however, the product shows real innovation from Microsoft for the consumer market, the first the company has shown in a long time," he said. "Both the Xbox and Zune were me-too products that entered competitive markets. Milan raises the bar for other consumer electronics vendors."

"I've regained confidence in Microsoft with this product," he said. "It's showing a different side of Microsoft, which is cool."