From what I've read, install is required, but it's whether or not the disk is in the console that matters in this case. I
f you want to play the game without the disk, and you didn't pay for it, then you have to pay some kind of fee.
At least that's how I've read it :S
But you would have to install it no matter what which means you would have to pay a fee to play a game if your not the first to install it. The not playing without the disk just seems like a bonus if you install if I understand it. Still seems a bit confusing because i wonder what the fee will be and if the second owner would keep the download forever or not.
As I see it: Yes, you have have to install no matter what, but you only have to pay if you want to play without the disk in (as it uses the game to authenticate the install, as the 360 does now).
Microsoft really need to start clarifying this stuff quickly before it gets too ahead of them.