One of the really powerful things about Xbox Live is as an anti-piracy tool (though an online service doesn't require a console to fight piracy).
However, one has to wonder exactly what the argument against PC gaming is (again) if consoles can't stop piracy either.
One also has to wonder if someone will get serious and start working on an Xbox Live "bypass" for banned players.
The other fun question comes when these consoles are resold on eBay or whatever and the purchasers want to register for Xbox Live.
A good service for Microsoft to offer would be to create a way for potential console purchasers to check the "ban status" of a console.
Finally, how many game sales do pirated game consoles cost Microsoft? If the problem is not widespread, then there is no revenue problem, but if it is, then does banning really help? (A while back, pirated consoles were totally routine in Asia, I haven't heard anything on the topic recently)
Major Nelson (2008), "Xbox 360 Console banning", http://majornelson.com/archive/2008/11/11/xbox-360-console-banning.aspx
B. Parfitt (2008), "Hryb justifies Xbox 360 modding bans", http://www.mcvuk.com/news/32306/Hryb-justifies-Xbox-360-modding-bans
Reported by http://playnoevil.com/serendipity/
Neowin writes "I've gotten a few messages and seen some forum threads pop up on console bannings so I thought I'd post and let folks know what's up. In our our continued effort to keep gameplay safe and secure for our community of more than 14 million members, Microsoft has taken action against a small percentage of Xbox 360 consoles that have been illegally modified in order to play pirated games. You should know that modifying your Xbox 360 console is also a violation of the Xbox LIVE terms of use, will void your warranty and result in a ban from Xbox LIVE. The health of the video game business depends on customers paying for the genuine products and services they receive, both from manufacturers and the local companies that support them. We will continue to employ and bolster anti-piracy security measures to counter piracy in the gaming industry and improve security in the Xbox LIVE community."
Microsoft may think they have control...
...But Microsoft doesn't. There are ways around getting banned from Xbox Live with a softmodded 360. There are very key specific files added to the hard drive that appear undetected to Microsoft, allowing you to play a burned game on Live, being undetected. Also, Microsoft has said before that instead of targeting gamers with a burned game PRIOR to its release date, they don't care. They said that they plan on banning people having the game AFTER the release dates of the game, letting off the people who played it prior to its release date.
Weird, eh?