Once you've set up, you'll effectively have an Outlook account, an Xbox account, a Skype account and more, all under one simple single-sign in solution.
You will just have to pick an email and a password, and set up an alternate method of contact for security. If you don't have a Microsoft account, it's pretty simple: hit the "Get a New Email button" when prompted during your Xbox setup, or go to Microsoft's website to start account creation. If you have a Microsoft account, you can just sign in with your email address or phone number, and your password. When you start up your Xbox, after picking your location and network settings you will be prompted to log in to an existing Microsoft Account, or set up a new one.
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