Microsoft has decided to take on the Apple itouch and went ahead with its Zune HD. This sounds quite like the Palm Pre vs the Apple iPhone. Apparently the Zune HD is going on sale around the same time as the iPod touch would be announced, i.e. first week of September.

While the Zune HD is quite up to date with features and has things that the Apple iPod lineup lacks … like the FM, the OS x and UI with the AppStore might be Apple’s best bet. And who knows you might well see those Camera iPods from Apple coming up. But one thing is clear here! Apple is gearing up to steal Microsoft’s thunder with its iPod event on Sept 9th…

Here are the features war:

The 8GB Zune HD is $100 cheaper than the current 8GB iPod touch 2G. But Apple has over 60000 apps loaded on the iTunes AppStore that can be a game changer here. How many times has it happened that a killer product comes in and loses out against Apple iTouch just because of that extra leverage from the App Store? Will the iPod touch 3G come up strongly against the Zune HD? or its the App Store that will rescue the iPod touch?