Sony has announced that it will release all future PSP games via online download in additional to its proprietary UMD format.

On October 15, PSP owners will get access to the PlayStation Store directly from their handhelds.  Japanese gamers will be able to download full titles from the online service.

There has been no word of an equivalent service outside of Japan.

Microsoft has announced that it will give away Undertow for free to Xbox Live gamers who download the game between Wednesday, January 23, 2008 and Sunday, January 27, 2008. The game will be available to all Xbox Live gamers, including both the paid Gold and unpaid Silver subscribers.

Undertow is a 3D underwater shooter game available on the Xbox Live Arcade. The game carries 3D graphics beyond that of most of the arcade titles available on Live, which consists of casual games available in the $10-15 price range.

The free game offering is officially a thank you to Xbox Live’s subscribers, but the game was originally promised as compensation for network troubles experienced by the Xbox Live service during the 2007 holiday season. Despite the offering, a small group of gamers has sued Microsoft for $5 million U.S. Because of this litigation, Microsoft has announced that it is unable to comment further on the downtime issue, or on the status of the Xbox Live network.