Every set top box will include a personal video recorder (PVR) capable of storing up to 80 hours of programming and capable of delivering high definition content.
Trials will begin in late summer and autumn next year to BT customers without the need for a subscription fee.
The service will combine access to Freeview channels, an extensive video on demand library, catch-up TV and a range of interactive services.
The BT-Philips partnership builds on the recently announced alliance with Microsoft, which will provide Microsoft TV IPTV Edition as the software platform for BT's TV over broadband service.
Services available at launch or shortly afterwards will include:
Ian Livingston, chief executive BT Retail said: "We see next generation TV as a vital element of our vision for home entertainment. In an increasingly converged world, BT customers will be able to benefit from the combination of television, communications and the internet. For example, football fans across the country will be able to chat using video telephony while watching a match. Our catch-up TV offering will also allow people to watch programmes they may have missed but wanted to see."
There has been speculation that BT will bid for Premiership rights for the 2007-2012 seasons although the group deny this.