X-Out is a horizontally scrolling shoot-'em-up. Unlike most comparable games (e.g. R-Type), the game is not set in outer space or even in the air - instead, the fight between good and evil is underwater.
Through five levels, the player has to shoot countless enemies, complete with the obligatory mid-level and end-level bosses. After having completed a level, the player gets to purchase new weapons; instead of simply buying upgrades, it is possible to customize the ship by placing new weapons anywhere on it.