The device is reported to include Wi-Fi, HDMI, and a USB port. From the specs it sounds likely it will go head-to-head with Google's offering.
One difference we know is that Microsoft's device will use Miracast to stream to your TV. Google's proprietary streaming technology may have some advantages when it comes to allowing multiple people to control the TV. Aside from that, however, Miracast does have the potential to allow Microsoft to match the rest of Chromecast's features like full-HD streaming and mirroring screens - which Google has been shying away from due to pressure from content providers.
Price is arguably the Chromecast's biggest contributor to its significant success, so it will be interesting to see how Microsoft manages against the $35 that Google charges for the Chromecast.
The Chromecast is also multiplatform, available on Windows, Mac, Android, and iOS; although Google has again refused to support Windows Phone. Miracast is supported in Android, Windows Phone and Windows 8.1, so there is again technical potential to be competitive.
Whether to support Android may be a key decision in determining its future success. There are a lot more Windows users with Android phones than there are with Windows Phone devices. Something that works with both is probably going to be more attractive to these users.
Regardless, there is a lot of potential for integration into the Microsoft ecosystem, and to leverage their services. Another question is how it will work with the Xbox One, which seemed to be what Microsoft wanted to be the focus of your TV and living room.
Microsoft could become increasingly more Apple-like in the consumer space in the near future. They can create a very connected ecosystem, where having one Microsoft device encourages you to buy another. If they leverage Windows users to buy devices like these, it will give users a bigger incentive to buy integrated Microsoft tablets and phones. They already have a good foundation, with shared code, services across mobile devices, PCs, and the Xbox.
Have you been using the Chromecast? What are you looking for in Microsoft's competitor? What would be a deal breaker, or a deal maker?