So why did Microsoft chose the Consumer Electronics Show to unveil the Xbox? There are a few likely reasons: if nothing else, it kicks the year off with a bang. It's still a few more months to the Game Developer's Conference, and that is really for wooing developers to the system (something that Microsoft has not had any problem doing so far). CES is a much more mainstream show than E3 or GDC. Lots of mainstream media is in attendance, and with DVD players all the rage, there are more eyes than ever before looking for new product announcements.
Also, Bill Gates' keynote focused on Microsoft's expansion beyond the PC, and in addition to the Xbox, he showed off their next-generation of PocketPC devices and their new Ultimate TV set-top box. With PC sales slowing down significantly in 2000, showing off their non-PC products was a savvy way to keep investors happy.
What Bill unveiled in his keynote address was the console itself, including a controller. Everything we saw on the outside was the final design, so what you see there is what will be released later this year. Of course, the insides weren't ready yet, so this wasn't a playable system. The game demonstrations were done using the system from the developer's kit, which was described as being roughly 1/5th as powerful as the final console.