Available on Xbox Live today with first episode free; Peter Molyneux explains it’s a strategy to boost sales and will have implications for Fable III.

With the first section, the full childhood sequence, offered free of charge, Fable II: Game Episodes provide the same Achievements and challenges as the disc-based game, retain compatibility with existing DLC and player saves will seamlessly be carried between each instalment.

In an interview with Molyneux published in full here, the Lionhead creative director told us that the decision is in part to extend Fable II’s reach, having seen a big divide between the number of active Live users (around 10 million) and the number of Fable II sales (around three million). “As a greedy game designer I ask why. I can sit back and moan about it and wish the game had more presence at retail or whatever, or I could do something about it.”

The release is also part of a larger effort at Lionhead to understand how to create episodic games from a storytelling and game design perspective as well as a technical one, with the implication that episodic gaming will take an important role in forthcoming Lionhead games.

“One of the things that was pretty tough to do was not only getting the technology together but getting everybody at Microsoft to see what it needs to work. ...there are a lot of policy decisions to go through, and it’s really great to have been through that process already and not be burdened with that for the launch of forthcoming titles.”

Such forthcoming titles includes Fable III, announced at Gamescon this year. “One of the really big inspirations for Fable III is Charles Dickens’ books,” Molyneux tells us. “The fascinating thing is that he wrote them as episodes in such a way that there would be cliffhangers so people would go out to buy the next, but if you’ve got the whole book it doesn’t feel episodic.”

In his role as creative director of European Microsoft Game Studios, Molyneux has also been active in encouraging other developers to adopt similar thinking. “For quite a few projects it’s too late but it’s really fantastic to be able to go to teams and give them an idea – maybe they take it up or maybe not.”

To get the bigger picture, read our interview here.