As we covered a few days ago, Microsoft decided the release of Halo 2 was a good time to start banning people with
modded Xbox's. as they reserved the right to do in the terms of service everyone agreed too when they signed
up.
Microsoft's official word is "Users are not permitted to manipulate the system to the detriment of others." Modchips,
for those who don't know, are devices used to hack Xbox's so they can play backups of games, and do things outside the
scope of the original system design. For example a modded Xbox can, with the right software, be used as a home media
centre to play not just DVD (which is a feature of the Xbox, albeit with a purchased addon), but also DIVX and XVID
encoded AVI files, MP3's etc…
Microsoft's primary concern, at least publically, seems to be online cheating. A modchip would allow a modified
version of software to boot, giving cheaters an unfair advantage. (Wouldn't be much of a cheat otherwise.) Now as all
sane thinking people know, cheaters are scum, so banning them is a great idea. However, a lot of people that have never
broken the law are being caught with this. Merely upgrading your Xbox internal harddrive seems to, according to
reports, count as modding the system, and results in a ban.
Engadget
TUAW