Xbox Live was announced at E3 2002. It was first shown on the E3 show floor with the game Unreal Championship. It was a revolutionary service offering voice chat, friend lists and user "gamertags" that were consistent across all games. Xbox Live launched in November of the same year without many of the key features but quickly evolved into the premier online service. In just 2 years, Xbox Live reached 1 million subscribers. By the service's fifth year anniversary in 2007, Xbox Live has reached 8 million subscribers. By May 2008, Xbox Live reached 12 million subscribers. On February 5, 2010, Marc Whitten announced that Xbox LIVE reached 23 million members.
J Allard was in charge of the development team on Xbox Live and many of Xbox Live's features were his ideas. J Allard fought hard to make sure each Xbox shipped with an ethernet port on it. That was a unusual idea at the time because broadband was not as popular in 2001 as it is today. Also originally Xbox Live was going to display each players e-mail address instead of a unique "gamertag". J Allard fought hard to keep player's e-mail address hidden on Xbox Live to give players a safer, more secure experience while using the service. In a thinking session when the idea of voice chat came up, him and his team taped a microphone head set to an Xbox controller, which is where the idea for the microphone connecting to the controller came from.
New Xbox Experience (NXE)
The NXE was a new UI bundled into the fall update for Xbox 360 which was implemented on November 11, 2008. It streamlined many user interface annoyances with the previous "blade" dashboard such as marketplace selection delays, added streaming video, and overhauled the UI to be more similar to the Playstation XMB to select friend, marketplace, video and game, spotlight, and primetime categories. NXE introduced Avatars to the Xbox Live experience, developed by Rare Entertainment. Many Arcade and indie games have used avatars in-game. Since the launch of the NXE, Microsoft has rolled out updates than include Facebook and Twitter integration, Netflix streaming, Hulu streaming, ESPN.com and ESPN3 streaming (for supported ISPs), and weekly deals and discounts for Gold subscribers.
Gold and Silver
Xbox Live offers two different versions of their service, Gold and Silver.
Xbox Live Gold costs $60 a year and allows you to use all of the features of the service. Gold members can usually play demos and enter betas a few days earlier than Silver members. New Xboxes come with a 1-month free trial of Gold, and many games also come with shorter free trials.
Xbox Live Silver is free for any Xbox 360 owner. You are allowed to purchase any content available for download, be it demos, movies, game add-ons, XBLA games, etc. The defining characteristic of Xbox Live Silver is that you cannot play multiplayer games on the network. Silver members must wait a week before they can download a demo, whether it's for Xbox Live Arcade, Indie Games or regular Xbox 360 games, this is something that started in late 2008. Additional features such as Last.fm, Netflix, etc. which were added in 2009 cannot be accessed by Silver members either, even if they have a paying subscription to them.
End of Original Xbox Support
On February 5, 2010, Microsoft announced that they would be discontinuing Xbox LIVE service for all Xbox games and consoles as of April 15, 2010. This happened to "allow us [ Microsoft] to continue evolving the LIVE service with the new features and experiences that fully harness the power of Xbox 360 and the Xbox LIVE community." Microsoft has stated that the 100-person-limit to the Xbox LIVE friends list was enacted to keep compatibility with the original Xbox. They have also stated that this may not necessarily change after service is stopped for the original Xbox. Bungie, developer of the multiplayer juggernauts Halo 2 and Halo 3 hosted a "one last hurrah" event on the 14th to send off the service that they helped make relevant. To help bring in a large group of players for the gametime, Bungie promised that gamers who play in matches with members of the development team would receive special unlockables for Halo: Reach. Late in the afternoon on April 15th, the original Xbox LIVE matchmaking services were officially turned off. Given the peer-to-peer nature of the service, however, those who remained connected to multiplayer games found they could keep playing for however long their connections held out. This gave temporary rise to the "Xbox 12" - a group of 12 players dedicated to leaving their systems on and staying connected to Halo 2 multiplayer for as long as possible. Over a period of a month, the "Xbox 12" gradually decreased in number until, sometime in May, the last of the group disconnected from Halo 2 forever. As a token of their gratitude, Bungie offered each one of the "Xbox 12" a free pass to the upcoming Halo: Reach beta.
Windows Phone 7
When Microsoft launched the Windows Phone 7 they included Xbox Live in the operating system of the phone.
The next generation of Xbox Live will debut with Xbox One. Confirmed features include an expanded Friends List of up to 1000 players, up from the Xbox 360's 100. Xbox Live will be compatible across the Xbox 360 and Xbox One, and will support cross-platform chat. Existing subscriptions will carry forward, and will be usable on both systems.