Major Nelson recently published a blog entry saying that XBLA bans were beginning for people with Xbox 360s that had been modified to play pirated games. That means those units will be blocked from using any XBLA service. It also means that if you were to say, purchase a used one from someone, you might not be able to use it on XBLA either because the ban will be at the console level, not at the account level.

He states that modifying your Xbox 360 "violates the Xbox LIVE terms of use, will void their warranty and result in a ban from Xbox LIVE." So if you’ve done it, don’t be surprised if they do it to you.

For the full blog post head to his blog.