The new feature, called Xbox Music, is not on offer anywhere else at the moment.
Sweden's Spotify, for instance, allows track selection and playback on personal computers for free — with the occasional audio ad — but doesn't allow you to pick exactly the song you want on tablets unless you pay $10 a month for its premium subscription.
Although this is a step forward for the music industry, its appeal is limited by the expense of most mobile data plans. Most cost more the more data you use, which can make streaming music on cellular networks fairly expensive.
The free version of Xbox Music won't let you download songs and save them for offline playback. That will require paying $10 a month.
The paid subscription is also required if you want to use Xbox Music on the Xbox 360 game console or on smartphones that use Windows Phone. On the game console, an Xbox Live Gold membership, which costs $60 a year, is also required.
On PCs running Windows 8, Xbox Music will basically match Spotify's offer of free track selection and playback.
In a demonstration on Friday, Xbox Music General Manager Jerry Johnson showed how one's playlists are saved online and can be accessed when switching between the service on the Xbox 360 game console, a Windows Phone and a Windows 8 tablet.
Each iteration looked similar and had a clean interface with sharply detailed cover art. Xbox Music will be the default music player on all new Windows 8 devices, which will be available upon the launch of the new operating system on Oct. 26.
Current users of the Xbox — about 66 million worldwide — will gradually be introduced to the service with a 30-day free trial starting Tuesday.