Microsoft today released Xbox LIVE Update with features that improve entertainment and gaming experience. Starting August 13th you will be able to download full Xbox 360 games and play them without a disc. The update also adds improved Netflix streaming and new avatars.

The Games on Demand feature will allow purchase of games, playing and sharing of games without physical disc and downloading / printing of game manuals from Xbox.com. Updated Netflix streaming service makes it easier to find new content and improves playback experience. Microsoft has updated the UI by re-organizing some parts of the dashboard to make it easier to find things.

Xbox LIVE Update is available as a free download and Microsoft has promised that it will add Facebook, Twitter, Last.fm and Zune Video support to the service this fall. You can get more information about the update here.