The Xbox 360 system Southbridge contains a full silicon implementation of the XMA decompression algorithm, including support for multichannel XMA sources. XMA is processed by the south bridge into standard PCM format in RAM. All other sound processing (sample rate conversion, filtering, effects, mixing, and multispeaker encoding) happens on the Xenon CPU.
The lowest-level Xbox 360 audio software layer is XAudio2, a new API designed for optimal digital signal processing. The Cross-platform Audio Creation Tool (XACT) API is also supported, along with new features such as conditional events, improved parameter control, and a more flexible 3D audio model.
In early 2006 the XMA format was modified slightly in order to improve file seeking. Prior to this change, it had been impossible to seek or loop an XMA file unless the entire file was resident in memory. The new format, dubbed XMA2, involved rearranging the file into "blocks" and making use of some previously undefined fields in the XMA header. XMA2 is backward-compatible with XMA1.