In a challenge to the videogame establishment, Barry Diller’s IAC/InterActiveCorp said on Tuesday it will launch an Internet service that it claims will offer the first “Web-delivered gaming system.”

IAC said the service will use peer-to-peer technology to render browser-based computer games with graphics that approach those in high-end consoles, such as Microsoft’s Xbox and Sony’s PlayStation 3.

IAC’s announcement follows the company’s two-year effort to buy a gaming company, which culminated in its stealth investment in Eugene, Oregon-based GarageGames in the first quarter.

Mr. Diller’s company said GarageGames’ P2P technology will be wrapped into a new IAC unit called InstantAction, which will serve up a variety of in-house and third party web-based video games.  

Shana Fisher, senior vice president, strategy and mergers and acquisition for IAC, said the new unit will deliver console-style action and graphics without the upfront costs. A Sony PlayStation 3, for instance, costs $500 or $600, and games typically cost $60. Other big players in the console arena are Nintendo, maker of the Wii and Electronic Arts, the largest computer game publisher.

GarageGames is “completely disrupting the current videogame business,” Ms. Fisher said in an interview.

While Blizzard Entertainment’s massively multi-player role playing game World of Warcraft offers rich graphics, players must first download software before they can play the game.

Meanwhile, most videogames now available through Internet browsers typically do not attempt to replicate the quality of gaming consoles, appealing instead to “casual gamers” who do not want to spend time learning the complexities of a title.

Ms. Fisher said InstantAction lends itself to several money-making models, including advertising and subscriptions.

Terms of the deal for the majority stake in GarageGames were not disclosed.

Speaking at a Goldman Sachs conference in Manhattan, Mr. Diller said that the economic appeal of creating a videogame site lies partly in the network of users.

“Once this becomes a community, the community itself will be the power,” he said. “The common platform will be in and of itself a powerful thing to have.”

In a telephone interview, GarageGames Chief Executive Josh Williams said the 8-year-old bootstrapped company would develop some games itself, but also offer tools to independent publishers to create games for the new platform.

Unlike console games, whose budgets sometimes can rival that of a Hollywood movie, InstantAction games can be developed on a relative shoestring, he said.

“Our games are beginning in the sub $1 million range and up from there,” Mr. Williams said. “Fifteen million (dollar) budgets are not something we’re pursuing.”