A source with an Xbox 360 developer kit has been so kind to post images of the Sony PSP and the Xbox 360 interacting with each other. This feature was one of the surprises Microsoft had touted at E3 2005 earlier this year, a feature that probably drew significant attention from the Sony camp.
Below is the post created by the user posting under the name 'misterDNA'
Note: *We don't want to get the guy/girl/shim in trouble therefore we removed the source link to the original post.*
I finally got an xbox360 dev kit today, and was able to see how well it interacts with the PSP. It worked great - I was able to listen to mp3s right off the PSP through the Xbox360 Music Player, and view images from the PSP at full screen.
Anyway, here's what it looks like in the Xbox360 Dashboard - click one of the thumbnails below to see a larger image: