According to the San Jose Mercury News, "Microsoft has quietly circulated the specifications for its next-generation Xbox video-game console," giving a glimpse for the first time of the internal architecture of the console.
The Xbox Next will reportedly use three 64-bit processors similar to those used by Apple's G5 machines giving it "more computing power than most personal computers." A benefit of switching architectures is the ability to use a wider data path, enabling more information to be processed at once. According to the report, the Xbox Next will use a graphics chip designed by ATI (the original Xbox used a graphics chip designed by NVidia). The new chip is reportedly faster than ATI’s upcoming R400 GPU.
For memory, the Xbox Next is said to have 256MB of RAM, though the console can easily support more. In comparison the current Xbox only has 64MB of RAM. The extra memory can be used for higher resolution textures as well as visual enhancement techniques such as double-buffering and anti-aliasing at HDTV resolutions.
At this point there is no word from Microsoft regarding backwards compatibility. The architecture shift from a x86 CPU to a PowerPC CPU means that the Xbox Next could not run Xbox games natively, however given the relative jump in computing power emulation is a possibility. Microsoft recently acquired Connectix’s Virtual PC technology, so it is entirely feasible that the Xbox Next will simply support Xbox games via emulation.
Unlike Sony's unveiling of its Cell chip, none of these specs are official so nobody can know for sure if the information is legit. Until Microsoft gives the official word, analysts and enthusiasts can only make educated guesses (and wishes).