Microsoft has promised that hundreds of games designed for its older Xbox 360 will work on its newer Xbox One console, starting with a handful of titles this year.
It also showed off how its HoloLens headset can be used to play Minecraft via hologram on a coffee table.
The presentation in Los Angeles kicked off Microsoft's presence at E3, the annual video game conference that draws thousands of bloggers, gamers and journalists from around the world.
In addition, the company showed footage of Xbox One games coming this holiday season, including Halo 5: Guardians, with multi-player support for 24, up from 16 for the previous instalment. And it announced Gears Of War 4 would be available exclusively to its platform next year.
The announcements come as Microsoft attempts to catch up from being behind in the console wars. It said in April it had sold 10 million Xbox One units since launch in November 2013. In contrast, Sony says that by March, it had sold 22.3 million PlayStation 4s, which launched the same month.
"If you've been waiting to move from your Xbox 360, now is the time," Xbox head Phil Spencer told a crowd of hundreds at The Galen Centre, an arena on the campus of the University of Southern California.
By adding backward compatibility to select games like Mass Effect - which started yesterday for some 300,000 players in its preview programme - Microsoft hopes gamers can ditch their old consoles for the newer one. It also is a dig at Sony's PlayStation Plus subscription service, which offers older PS3 games for streaming but costs 50 dollars (£32) a year.
"We won't charge you to play the games you already own," said Mike Ybarra, Xbox's head of platform engineering.
Microsoft demonstrated how its HoloLens could herald the next generation of gaming. It is an augmented reality headset that allows the viewer to see holograms amid the real world.
Microsoft Studios executive Saxs Persson played Minecraft with the headset on while staring at a wall. He also played using gestures and voice commands, interacting with the world on an empty coffee table.
A special camera allowed the audience to see what he was seeing - a perfect 3D representation of a pixelated Minecraft world.
He zoomed into the scene by saying "closer" and could look through walls to see inside rooms and underground simply by moving his head inside the hologram. He could navigate by pinching his fingers and moving his arm.
Beside him, Lydia Winters, brand director for Minecraft maker Mojang AB, played her own character in the same world using Microsoft's Surface tablet.
"Microsoft HoloLens gives the community a different way to play in the worlds they already love," she said.
Microsoft did not announce pricing or availability.
The demo came a week after it was announced that an Xbox One controller will come with every Oculus Rift headset, a virtual reality device that also immerses wearers in fictional environments but blocks out the real world. Upcoming Xbox One games will be playable on that headset as well.
For hardcore gamers, Microsoft also announced the sale of a new 150-dollar (£97) controller called Xbox Elite, with interchangeable thumbsticks, paddles, and buttons whose functions can be swapped around, starting in October.
Mikiyah Quinn, a web administrator and content manager for the website TiCGM.com, said the developments were welcome, considering both the Xbox One and PS4 "lacked features" when they were released.
He highlighted the backward compatibility for older games, the ability to transfer over one's game experience and levels to the new platform and ability to stream one's game play on older titles through streaming video service Twitch.
"Fans have been wanting these things for a long time," he said.