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What is an Emulator?
An emulator is a program that allows people to play console-based video games on their personal computers. Emulators do this by mimicking a console's behavior. Most of the emulators available now are for older, less powerful (when compared to modern personal computers) gaming consoles such as the Nintendo, Sega Genesis and PlayStation.
Central Processing Unit
One reason an Xbox 360 emulator hasn't been created is because there is a gap between the average computer's performance and that of the Xbox 360. While most personal computers today run on Intel-based microprocessing chips, the Xbox 360 has a CPU that is based on IBM PowerPC architecture, which has traditionally been used in Apple computers. In addition, unlike most personal computers today that have single, dual or quad cores, the Xbox 360 has three cores. This means that you would have to figure out how to emulate three processors if you decided to build one.
Graphics
In addition to the CPU, one of the biggest challenges of emulating the Xbox 360 on a PC is its graphics processing unit. The Xbox 360 uses a Xenos graphics processing unit. To emulate what the Xenos GPU does for the Xbox 360, the graphics card on your PC would have to be able to emulate many Xbox 360-specific graphics such as pre-compiled texture formats and the vertex and pixel shaders.
Cost
Another reason an Xbox 360 emulator hasn't been developed is the price of the Xbox 360. When it was released in the United States in 2005, the Xbox was priced just under $400. This put it out of the price range for a lot of people. Since that time, the price of the Xbox 360 has steadily dropped, making it a feasible purchase for people at a variety of income levels. Because most people who want an Xbox 360 can purchase one relatively cheaply and because of the costs associated with having a computer powerful enough to emulate an Xbox 360, many game enthusiasts decide to purchase the real thing.