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Microsoft making enemies again or just protecting their online network from hackers and pirates? you decide. Microsoft has confirmed that it had banned a “small percentage” of the 20 million Xbox Live users worldwide. They claim that by Modifying your xbox console it violates the terms of service and would result in players being disconnected or banned from the XBOX network.
“All consumers should know that piracy is illegal and that modifying their Xbox 360 console to play pirated discs violates the Xbox Live terms of use, will void their warranty and result in a ban from Xbox Live,” Microsoft has said in a statement.
“The health of the video game business depends on customers paying for the genuine products and services they receive from manufacturers, retailers, and the third parties that support them.”
The XBOX is equipped with DRM (Digital Rights Technology) that detects pirated software. Many gamers modify their systems with mod chips so they can play pirated or “unofficial” games, but not every chip and every unofficial games are illegal. Microsoft did not specify how they determined who had hacked hardware but they do insist that everyone that was shut out of the XBOX Live network was confirmed to be violating the terms of use.
Online sources say that as many as 600,000 users where affected by the bann (3% of all users), not a huge hit to the network, but im sure just enough to anger a lot of fan boys.
Article from Gamersyndrome.com
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The term used to describe the increasingly evident case of severe video game addiction. Coined by our resident expert Dr. Chang who can often be seen killing zombies or casting fireballs. 
some sites are reporting as many as 1,000,000 where banned, thats pretty huge seeming that at a minimum some percentage of them would have paid money or had a gold subscription to get onto the xbox live network. Bill do you like it when people hate you? haha
I better watch what I say on Xbox Live from now on:
“Damn! Xbox Live is so laggy!”
*Growling noises heard through the television screen*
“I…Err…I mean, WOW! Xbox Live is so great?”
*Growling noises stop*
Microsoft ban for piracy/hacking only. You’re safe.. for now.
just don’t mention anything about mod chips
Good thing I’m an honest gamer. Still, this is certainly not a time to buy a used 360, since most of them will probably be banned.