Normally I'd be all pro-mod or whatever, but since there isn't really any sort of homebrew scene on the 360 to justify all that firmware hacking, there isn't much of a good reason to mod your console in the first place. So, if you've been using a modified console online, there's a chance that your system has been banned and won't be able to connect to Xbox Live anymore. Which, really, serves you right for connecting to Live with a modded system in the first place, ya big dope.
Here's what Xbox community kingpin and all-around hustler Larry "Major" Hryb "Nelson" had to say on the topic:
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.
The timing makes sense, considering there were probably a bunch of people foolish enough to bootleg the early copies of Gears of War 2 who couldn't resist getting online with it.