Software giant Microsoft has wi-fi-enabled its forthcoming Zune portable media player device in a bid to unseat the iPod from its throne.

Late Thursday, the Redmond Giant gave consumers a sneaky peek of the device, with which it will go toe to toe with the 500 pound gorilla of the digital music player market – Apple.

Zune is to be a cornerstone of Microsoft’s “Connected Entertainment vision”, designed around the principles of sharing, discovery and community. “The Zune experience centres around connection – connection to your library, connection to friends, connection to community and connection to other devices,” the company said.

Naturally, that means sharing on a legal basis. Whilst a wi-fi connection encourages Zune-ers to share full length sample tracks of select songs, homemade recordings (but not video), playlists or pictures, the device’s inbuilt Digital Rights Management (DRM) will only allow you to listen to received tracks up to three times over three days.

And this goes for unprotected MP3 files too. In what appears to be an attempt to stop the Zune becoming a new channel for illegally sharing music content, Microsoft has said that any and all music files shared between devices will be restricted.

“Zune will support your existing, unprotected, music library (MP3, AAC and WMA files),” a Microsoft spokesman said, but the device “will easily convert and play unprotected (ripped) songs.”

What this means is that the music stays in native format but when it is transferred using wi-fi, the plain MP3 file gets a DRM wrapper on it that gives it the three plays/three days limits.

For the legitimate purchase of content, Microsoft is pitching the Zune Marketplace.

But it looks unlikely that the appearance of the Zune could have much of an effect on digital music either way. According to research from analyst Jupiter Research, 80 per cent of MP3 player owners simply do not buy digital music regularly. Although iPod owners demonstrate a slightly more positive trend than other MP3 player owners, the difference is minimal and Jupiter said that while the Zune Marketplace is an important differentiator from the non-Apple competition, most MP3 player owners still use their devices to rip CDs and store freely sourced content.

A Microsoft spokeswoman hinted to telecoms.com that the Zune would be the first of a portfolio of wireless-capable devices and it is not hard to imagine that at some point along the line, cellular will be a feature.

The Zune will be available in the US by Christmas for an estimated $300. The device packs 30GB storage, wi-fi, a built-in FM tuner and a 3-inch screen. Zune comes in three colors: black, brown and white.