A new age is dawning in the video game business, and Microsoft wants to be part of it. Today, Microsoft is formally launching its Age of Empires Online game as a free-to-play online-only title. That means users can start playing the game online for free and can purchase upgrades and virtual goods with real money.

While free-to-play games have nibbled at the edges of the game business for a while, Age of Empires Online is a major release that validates the business model. The mainstream of Age of Empires series has sold more than 25 million copies since 1997. This new title really takes free-to-play games to a new level because of the quality of the game play, graphics and depth.

“This game is in the big leagues,” said Chris Taylor (pictured, right), chief executive and creative director at Gas Powered Games, which developed the game along with Robot Entertainment for Microsoft. “If you’re wondering where PC gaming is going next, this is where it’s going. It’s a huge shift.”

Taylor said in an interview that the free-to-play model will let lots of players sample a game that has been built from the ground up as an online title. They can download the game and play either the Greek or Egyptian players. If they want to save their civilization as a permanent city, they can store it and reach the level cap of 40 for free. For more features, players have to pay about $20 (or 1,600 Microsoft Points in the company’s virtual currency). They can unlock new civilizations for $19.99. And they can also buy decorative buildings for $4.99 and other features for relatively small amounts, much like you can in free-to-play mobile or Facebook games.

The download is two gigabytes of data. That may scare off some folks who have lousy internet connections or weak computers. But it doesn’t take that long to download, and it enables much richer graphics and smooth character movement, Taylor said. Since you can play multiplayer battles against your friends, the game play is virtually unlimited. If you want to play single-player quests, you can stay busy for something like 50 to 100 hours.

The user interface on a mission map is well designed. You can see how many of your villagers are sitting idle and set them to work gathering resources. You can also see if you have too many people collecting gold and not enough chopping wood.

The art style of the game looks great, but it is slightly less realistic and a little more cartoonish than the previous Age of Empires games.

I played for a short 24-minute mission and was impressed with how cool the graphics look on Taylor’s high-powered laptop that can show off all of the effects. You can build and deploy your forces in real time, just as the enemy builds up forces to attack you. Each civilization has specialist soldiers that come in handy during a fight. And if you level up high enough, you can mix and match the best soldiers of the various civilizations.

In my battle, I played the Greeks and had to attack the enemy’s Wonder (a major artifact with magical power)  and fend off constant attacks while building up my forces. I had to juggle a bunch of tasks, making sure I had enough civilians working on resource collection, building structures that could yield new kinds of military units, and posting soldiers to defend against the enemy. Once I built up enough forces, I took the battle to the enemy and destroyed the rival city — all in one setting. The battles require a lot of attention to detail, as you can get yourself into a lot of trouble if you send the wrong units to attack strong defenders.

You can keep your own capital city on a permanent basis. The more you play, the more you can earn features to help make your city bigger and more grandiose. That gives you a sense of community and a reason to visit your friends’ cities. You can obtain all sorts of gear and craft products from them. You can then sell those products on the market and earn currency to spend in the game. You can also shop other players’ stores and buy things your own city needs. In that sense, it resembles a massively multiplayer online game.

“We think of it as an MMO with real-time strategy,” said Danan Davis (pictured left in photo), executive producer of the game.

The game has a number of features that keep players playing. If you win a battle, you can win a treasure chest full of cool stuff for your town or army. If you pay extra or earn enough points, you can unlock features such as a technology tree, where you can develop new technologies over time.

“It’s going to be easy to get into, but hard to master,” Davis said. “We keep adding layers of depth, but you can play at the level that suits you. There are many ways to customize it.”

Microsoft has been patient in the development of the game. A beta test ran for 12 months and 180,000 people participated in it. Much of the feedback resulted in changes to the game. Based on feedback, the developers included the Spartan civilization and created a pro civilization level where you can start at a higher level.

The developers spent more than two years overall creating the game.

“I’m glad we arrived here, since it’s a long time since our industry has been this exciting,” Taylor said. “We think this game will be one of the best value propositions out there in free-to-play games.”