it seems that Microsoft has been looking at he success of the Wii and decided that the Miis would look great on the 360.  The rumor has it Microsoft is working on a replacement for the gamer pic and will introduce 3D avatars that look amazingly similar to a Mii except they are a higher resolution.  These avatars will be playable in multiple games just like Nintendo's Miis.  It is also rumored that there will be some marketing involved where you could possibly buy clothing for your Mii.  Sounds a bit like what Sony has proposed with it's avatars in Home.  Could Microsoft be taking advantage of the Home delay by usurping Sony and introducing as 3D world for Xbox Live members?  It does seem that Microsoft is taking the best of both companies ideas and making a superior product.  Not like Microsoft hasn't done that before.

Sources:
xbox360fanboy - rumor-avatars-are-microsoft-take-on-miis
kotaku - leak-seems-to-confirm-xbox-live-avatars-on-the-way
kotaku - microsoft-avatars-will-be-playable-licensed