New York--Calling all recruits: Microsoft (MSFT) wants you—to create video games.

Aiming to build the number of homegrown games available on Xbox 360, Redmond, Wash.-based Microsoft announced earlier this week it will soon start letting Xbox LIVE members play, rate and share games created by the community. (Xbox LIVE is an Internet multiplayer game service by Microsoft.)

“It’s all about giving the most choice to our customers,” said Chris Satchell, general manager and chief XNA architect at Microsoft. According to Microsoft, by the end of 2008, people who have the Xbox game console will have access to more than 1,000 games.

Microsoft will start offering the XNA Game Studio 2.0 development tool kit for free, which lets people develop software games. While anybody can do it, Satchell acknowledged that you will need some expertise in writing software code. The games can be written in Microsoft Word and then migrated to Xbox.

But Microsoft isn’t stopping there. For $99 a year, Xbox LIVE subscribers can become part of a peer review group that reviews all the games before they are put up on Xbox LIVE.

“There are a couple of ground rules” for creating the games, said Satchell. The main rules are that the games don’t infringe on intellectual property and aren’t composed of content that is extremely objectionable. “Aside from that we are not arbiters of content,” he said. The peer review will be tasked with making sure the coding and content is accurate.  

Satchell said that by charging $99 a year to be part of the peer review, the software behemoth can feel safe in knowing that the people really care about the quality of the games. “With communities that have a vested interest the community self imposes standards of conduct pretty vigorously,” said the Microsoft executive.

In connection with its announcement, Microsoft showcased a handful of home-grown games, including one called “JellyCar,” which is a game about driving a “squishy car” through “squishy” worlds. Another game called “RocketBall” is about a multiplayer game of dodgeball. The beta test for this service will kick off in the Spring.

Microsoft’s move to let users create their own games is its first. For years, users have been able to create their own levels for PC-based games, but that hasn’t been the case with the game-console makers. Satchell said Microsoft’s service should be appealing to game developers because of the audience they will be able to reach through Xbox. According to Satchell, the online community is “super engaged,” logging 5.4 billion hours of game play.

“What’s the point of being a brilliant musician if you don’t have an audience? What’s the point of having a brilliant game created if you don’t have the audience?" he said.

Richard Doherty, research director at market research firm Envisoneering, said Microsoft’s new service is designed to enable Microsoft to find the next big games and developers.

“There aren’t a dozen Will Wrights in the world," said Doherty, citing the popular game creator who created "The Sims". “Basically, this is a business statement to differentiate themselves from Sony (SNE),” which Doherty said is a tough competitor on the development front. What’s more, Microsoft gets access to talent on the cheap and increases the number of developers.

“Microsoft’s numbers have always been important," said Doherty, of the amount of developers it could reach. As for whether Microsoft will pay developers if their games become big hits, Satchell said Microsoft hasn’t started to look at the business model yet for the service. That, he said, will be done following the beta launch in the Spring.