The Xbox Live community has just shrunk by 1 million people. The new Call of Duty was released early this week, but for these 1 million people it was early last week. These players were successfully able to modify their consoles to get around digital rights management technologies, which are designed detect pirated software.
Here is a statement Microsoft gave to Informationweek:
It is still undetermined how long the ban will be. When a user is banned for Xbox Live they are banned from the network, not just that certain game. Your Xbox will still work in offline mode though.