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NXE stands for New Xbox Experience and is the new update to Microsoft's Xbox 360 on Xbox LIVE. It completely changes the dashboard and has avatars, gives you the ability to delete games off your played games list with 0 achievements. You can chat up to 7 other people in a new 'party' system, private chat still exists but the party is for Gold subscribers only. You can install games on to the 360's hard drive to improve loading times and make reading the disc quieter (but you still need to disc in the drive to prove you own it).
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