Microsoft has cracked down on an estimated 600,000 users, perhaps as high as 1,000,000 for piracy. The official statement is modding their console, but lets not kid ourselves here; the only reason to mod a console is piracy. You can spew garbage about region locking all you want, it's an american company and there wasn't any Japanese brawler you had to have here. You modded your console so you could play pirated discs, period.
To further differentiate meaning here, the people who mod their Xbox's to add lights, color, a new DVD Drive or fans for required additional cooling are not the ones getting kicked. It's people who have firmware hacked their DVD drives so copied discs can play. What's even funnier is these morons are flooding Microsoft with calls on their banned consoles You were dumb enough to log on to Xbox Live with a modded console, that's darwin - suck it up princess.
Piracy on a 360 is easier than piracy on a PC, you don't have to contend with activation, virus infected EXE's, protection updates disguised as patches or waiting for cracks. One firmware hack and you can play any 360 game you can find on the net, now that's convenience.
Microsoft isn't done yet and plans to add additional bans soon and to be clear on what that means, the consoles themselves are being pulled from the network and not the accounts. If you log on to your account from a legit console then your account is intact, it's the ID within the console that can no longer access Live and the console itself continues to function otherwise.
Does this ban coincide with the release of Modern Warfare 2? I would place my money on yes, and these million or so pirates are now even more enticed to go out and purchase another console so they can get back to the online fragging in what will surely be 2009's game of the year. Now what's 600,000 x $200?