Not many details are known at this time, but the project is being headed by Robbie Bach, who is the man responsible for XBOX. According to Reuters:
Microsoft’s service will emphasize the pay-per-download, or a la carte, model, the sources said. A subscription component will also be offered, according to early accounts of the planned service. One source, who has seen a demonstration of the service, said it was an improvement over iTunes.
An improvement over iTunes? This ought to be interesting… You can be sure that as news of the MS iPod develops, MacUser and Macworld will have you informed.
[via Slashdot]
I realize the context in which you're using the word, but "equivalent" might be a little generous.