Set in the year 2912 AD, the player takes the role of Kyle Brennan, an Earth test pilot for the X-Shuttle, better known as the X-Perimental Shuttle, which has the ability to jump from one part of the universe to another via a wormhole without requiring a jumpgate.

He works with them to discover the forgotten history of the Argon - that they are descended from humans who were cut off from Earth centuries ago in a war with rogue machines known as the Terraformers.

Depending on his status with the different X-Universe races, Brennan finally forms an alliance to attack the Xenon forces and destroy their super-weapon, thus completing the game, but Kyle is stranded in the new sector of the Galaxy and is unable to return to Earth.

By trading with them the player makes a profit, which allows one to upgrade the X-Perimental Shuttle with new weapons, better shields, and increased cargo space.

For example, selling a large amount of one particular product to a single station will result in the price for further consignments dropping in proportion to their demand.

A time-accelerator device reduces the transit time, but it needs to be found and purchased, which means the game moves at a frustrating "snail's pace [for] the first 10-20 minutes".

[4] Still, "[a]fter as little as an hour of gameplay, with some shrewd trading... you should be able to outfit your X ship with a pair of lasers ... and the time-accelerating 'singularity time distortion engine'", said one review.

[4] The combat system was lightly criticized as "being more of a goal to be overcome than a challenge to be relished", especially given the "suicidal as hell"[3] "kamikaze"[4] nature of enemy pilots, who appear constantly to wish to ram the player.

[20] Egosoft's managing director, Bernd Lehahn, described X-Tension as a space game that allows the players to live freely in a virtual universe and do whatever they want to do.

[22] The graphics were improved for X-Tension, adding new effects and scenery, and removing "visible seams which blighted many of these backdrops in the original game".

[21] When combined with some upgrades and equipment, this system allows the player to monitor the X-Universe's economy, traffic and prices remotely, a new feature which makes trading less difficult than it was in the original game.

[21] Notably, Egosoft's managing director, Bernd Lehahn, mentioned appealing to the Wing Commander audience as a high priority in the design of 2005 sequel X3: Reunion.

He defined this as "people who... expect a story and cool fighting missions" but who may be won over to "the freeform gameplay and the advantages that a realistic economy adds to such a game".