The service, which is built on Microsoft's Silverlight technology and will be available from the autumn, will allow consumers to purchase 'Virtual DVDs' from Tesco stores that they can download from the web onto their PC.
The 'Virtual DVD' will offer the same video quality, interactivity and bonus content available on the physical products but will also include extra features such as auto-updated trailers, exclusive bonus content and the ability to chat online with others currently viewing the film. MP3s, ring tones and related games will also be on offer.
"For the first time, consumers will be able to enjoy a DVD equivalent experience with digital movies, which paves the way for more advanced viewing experiences enabled through Silverlight," said Rob Salter, category director for entertainment at Tesco.
"This is just the beginning. In the future we expect to offer our customers innovative digital solutions that far exceed the DVD experience and deliver exclusive content, web events and services wherever and whenever they want them," Salter said.
Microsoft said a 'Virtual DVD' was a digital copy of a film "that is truly the equivalent of a physical disk - with the same package of navigation, bonus features and director commentaries".