When Engadget Editor-In-Chief Joshua Topolsky says something is game changing I tend to take notice. That’s how he described developments in the Windows Phone 7 world (previously Windows Mobile) in reference to a demo given at today’s MIX10, Redmond’s developer conference.

Specifically, Topolsky was referring to a Netflix streaming app (Watch Instantly) powered by Silverlight running on Microsoft’s latest mobile OS, along with support for XBox Live gaming.

Both moves clearly demonstrate that Windows Phone 7 series is the Zune phone that many have been wishing for. It’s also evidence of how the company plans to exploit what is arguably its strongest consumer brand – XBox – to give its mobile OS and the third-party hardware that will be running it, fresh impetus. Much needed in the face of so much competition from the likes of iPhone, Android, Palm, BlackBerry and Nokia.

A video of Netflix on Windows Phone 7 is embedded after the jump…