Acer today launched the first Atom-based PC with Nvidia's ION graphics processor, which could transform the netbook/nettop category by giving it full-blown graphics horsepower.

ION boosts the graphics capability of Atom-based systems by 10 times, giving them enough oomph to easily play full 1080p content, product manager Dave Ragones said.

Nvidia expects ION to transform the desktop PC market similar to the way low-cost netbooks have upended the laptop business.

"We fundamentally believe 2009 is going to be the year of the small desktop PC,'' Ragones told reporters in an online briefing, simultaneous with an Acer launch event in New York.

Atom-based systems currently rely on Intel's integrated graphics system, which limits their ability to handle video and 3-D games and applications.

ION is debuting in Acer's AspireRevo, a tiny Windows Vista PC that's 7 inches by 7 inches by 1.2 inches high. A price wasn't available yet, but Ragones dropped a hint: He said ION is debuting in systems around $299.

Revos can have up to 4 gigs of memory and 250 gig hard drives. They also have HDMI output for connecting to a TV or receiver, an eSata connector for external drives, a card reader and USB 2.0 ports.

Acer is upping the ante in the nettop space with a system that's small enough to mount on the back of a monitor, for a do-it-yourself all-in-one system.

It's also small enough to mount on the back of a TV, where it would be a great alternative to a cable box for people who switch to Web video.

The ION processor will soon appear on other systems -- netbooks, desktops and all-in-ones running Vista and soon Windows 7 -- where it will add about $50 to $100 to the cost, Ragones said.

I wonder if Microsoft will expand its "laptop hunters" ad campaign to look at desktops. Revo looks like a pretty tough competitor to Apple's $600 Mac Mini, which has basically the same Nvidia graphics processor. (Although the Mac has a DVD drive and a more powerful Intel processor ...)