Rumor mills have been on an overdrive for sometime now that Microsoft was interested in building its own Xbox-branded mobile gaming system. However, no one would have estimated that it would come in the form of a 7-inch tablet, dubbed the Xbox Surface Gaming tablet.

According to The Verge, plans for an Xbox Surface gaming tablet with a 7-inch display is well underway at Microsoft. The device is expected to come packed with an ARM-based processor, 288MB of RLDRAM 2, and a 7-inch display with 1280 x 720 pixels resolution. The operating system will likely be a custom version of Windows, which would work well since the main idea behind this tablet is gaming and media consumption.

The first tablet by Microsoft is the Surface RT that runs Windows RT, and the Surface Pro that runs Windows 8 Pro. While these tablets have certain Xbox-related applications built in, they are not built for gaming and Microsoft needs a robust gaming device that can rival competing tablet oferrings that cater to gaming. Critics may argue that the company has Windows Phone 8, but it is an operating system for smartphones and many devices will not be designed with comfortable gaming in mind.

A standalone gaming tablet such as the Xbox Surface could do the trick, and could possibly steal market share from other 7-inch devices in the smaller tablet market space, such as the Google Nexus 7 or the 7.9-inch iPad mini.

The Xbox Surface gaming tablet should not be seen as a product that is aimed at competing with the PlayStation Vita or the Nintendo 3DS, the display size is too large to be considered as such. It should be seen as a device that will compete with other tablets in its class, but only on the gaming front. Gaming on tablets have become popular since the coming of the iPad, it's a lucrative market and one that has the potential to eat into the Xbox marketshare.