During E3, Microsoft made several announcements regarding upcoming social features for its Xbox Live service. Updates include improvements to Netflix streaming, games on-demand, and the Avatar Marketplace, to name a few. Though some of the improvements seem pretty basic, they show promise and put Microsoft one step closer to its social gaming goals.

When Microsoft first began revamping Xbox Live, they attempted to turn this New Xbox Experience into something gamers would want to use everyday. Normally, players would log on to play various games with others, but did little else.  Microsoft sought to build a social network for the console realm, but users were less than thrilled with the result, spending little time there.

Microsoft released a set of surveys to gain insights into where it could improve the experience. In examining the survey results, it responded with far more intricate and demographic-related avatar ideas. Now, along with the new Live dashboard, comes new clothing and props for your avatars. Unlike before, these items come from popular games such as Fable 2 and Halo 3. Thus far, the categories within the Avatar Marketplace include those two games, as well as The Secret of Monkey Island, Steampunk, and Recessionista.

Items can be purchased for anywhere from 80 to 320 Microsoft points. They include everything from rubber chickens to a remote control Warthog (a military jeep from Halo). Since there is still work to be done in the effort to coax players into using the new service, it’s hard to say how these virtual goods will resonate. Nevertheless, the Avatars are getting a huge boost by granting some virtual items as rewards in the games.

Perhaps the best idea to come out of Xbox Live was the achievement system. These achievements are simple: The game notes you completed something (such as finishing a level). While it seems like a minor tweak, it has affected gamers. Adding something visible and “tangible”  to your Live Avatars is a significant improvement to an already good system.

In addition to the updates to the Avatar Marketplace, Microsoft wants to improve the platform for small, indie developers. When talking to Gamasutra, Shane Kim, Microsoft’s corporate VP of strategy and business development for its interactive entertainment division, stated the possibility of freemium and free-to-play games developing for an Xbox market. According to Kim, this would add significantly to Live’s social experience.

In addition, the re-branded Xbox Live’s Community Games venture was just launched a few days ago. Now dubbed “Xbox Live Indie Games,” the new brand helps address a complaint with Microsoft’s pricing structure; previously, games were deemed too expensive. The company has stated that developers can now charge as little as 80 Microsoft points, which equates to $1. Furthermore, the change is also going to be in effect for developers from Germany, Sweeden, Singapore, and Japan.

With the cost of games dropping to a mere $1, the possibility of developers who have produced games for the web to also make them on Xbox Live has increased. Since Xbox is not an open system like the PC, game creators will still have to determine whether or not they think creating a Live game is worth the economic trade-off. But with the new Indie program’s changes, the chances have at least improved. Couple this with the improvements to the Avatar Marketplace and you might have the makings of a true social network.

A full list of coming updates can be found here.