Yes as Tap In said in the coming update.
My understanding is that you'll be to watch Netflix with up to 7 other (8 total) Xbox Live members. Only one member actually has to have an Netflix account.
It sounds like a good way to get your friends subscribed to Netflix if they're on the fence. I think that this might have the most potential to bring in customers quickly if it catches on. I can't remember where I read it, but only 10% of current Netflix subscribers have a Xbox360, so there is potential 7M+ that could be converted.
This was the one thing that got my wife the most excited (no more waiting for Heroes to come in the mail).
The video store on PSN is pretty cool, I like how easy it is to find things. I have to wonder though what Sony is going to do to counter this since it seems to be a tit for tat between MS and Sony when it comes to multimedia features.