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:

Commitment to combat piracy and support safer and more secure gameplay for the more than 20 million members of the Xbox Live community remains a top priority. All consumers should know that piracy is illegal and modifying their Xbox 360 console violates the Xbox Live terms of use, will void their warranty and result in a ban from Xbox Live. We can assure you that if an Xbox Live member follows the Xbox Live terms of use, purchased a retail copy of Modern Warfare 2 and played the game on an unmodified Xbox 360, no action will be taken.

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.

Source: InformationWeek