There's a Zune event going on up at the Microsoft event today and the Zune team showed off a few demos of games. Two cool aspects are that Zune XNA games supports 8-player ad-hoc wireless game play, and while there is no 3D hardware acceleration, it can use software rendering for 3D. The demo for the first-person shooter, Potato Chase, put these features on display.
Gizmodo has posted a video for your viewing pleasure.