The annual battle of the consoles that takes place every Christmas will heat up this week when Sony launches its own version of Second Life for the PlayStation 3. The new service, called PlayStation Home, will allow players to create an online “virtual life” and interact with other players in a make-believe world.

Sony hopes to cash in on the massive success of Second Life, which claims to have 15m registered players around the world — albeit that the highest number active at any one time is about 76,000. It is, however, available only on a computer rather than a games console. To try Home, which is slated for release in the next 10 days, players must download a piece of free software from Sony’s PlayStation store onto their own PS3.

From here they must create their own character, known as an avatar; they are then free to explore Sony’s virtual lands complete with shops, apartments and cinemas. They can also meet and interact with other avatars from around the world, exchange ideas and play mini-games such as chess or 10-pin bowling. Avatars can dance together or blow each other kisses but, in case you’re wondering, interaction will fall short of full-on sex, a popular option for many Second Life fans.

Sony has high hopes of Home becoming a digital clubhouse where those with time on their hands can let their avatars hang out together online. Most of the service’s initial features will be free, and you are given a harbourside apartment that you can furnish as you choose. If you want to embellish your virtual home with fancy furniture or bling up your avatar with posh clothing, this will inevitably cost real money. For example, a pair of jeans will cost about 85p and a flash apartment will cost about £4. This will be paid for via PlayStation’s online store.

Home has been in the pipeline for some time, but the announcement of the launch so close to Christmas is no coincidence. This is traditionally the most popular time for gamers to invest in new consoles. Two years ago, when Nintendo launched its Wii, the device sold out across many shops in Britain, and — in what was something of a PR coup — the company was forced to airlift new stock in from mainland Europe. It pioneered the idea of creating permanent player avatars on a console.

Whether Sony’s marketing move will prove as successful remains to be seen, but initial reports are good. While Home is not as ambitious an undertaking as Second Life, Sony appears to have successfully created a slick environment for gamers to enjoy exploring. The initial choice of clothing for your avatar is limited, but many of the virtual stores have not opened for business yet and this, along with other aspects, will undoubtedly evolve rapidly.

Perhaps the most important feature is that if avatars meet up online, the players can launch a PS3 game directly from within Home that they can participate in, if they all have a copy. This may help PlayStation to catch up with the hugely popular Xbox Live online service.

Sony is not alone in attempting to entice buyers by adding new features to its console: Microsoft has completely revamped the software for its Xbox 360 consoles in time for Christmas shoppers. The company also insists it has finally replaced the errant chip that caused so many of its consoles to malfunction and has begun building some storage memory into even the cheapest of Xbox machines.

The crucial point for many buyers in these cash-strapped times will, of course, be price. And here the Xbox 360 has the advantage. Microsoft has recently slashed the cost of its Xbox range so that gamers can buy the most basic console for £130. The PS3 will set you back at least £350.