Xbox LIVE Program Manager, Micheal Dunn, outlined today Microsoft's plans to punish and reward Xbox LIVE players based on their in-game behavior.
Xbox LIVE player's reputation is calculated automatically using a proprietary algorithm which categorizes players into "Good Player," "Needs Work" and "Avoid Me" groups based on a number of undisclosed factors. All player start at the "Good Player" category and the vast majority of them stay that way. Players who receive negative community feedback slip over time to "Needs Work" then "Avoid Me." Until now, this had no effect beyond showing up in the player's Gamercard.
Starting this month, players in the "Needs Work" category will receive reputation warnings instructing them to increase their reputation – basically by playing enough time online without receiving negative feedback. Later on, Microsoft will start introducing penalties to "Avoid Me" players. Those penalties are not final yet, but they should include limiting their matchmaking pairings and banning them from some services such as Twitch broadcasting.
Microsoft also plans to reward Good Players in the future.