
I also belive it is a relay system, if M$ came up with a universal server for games of ALL types, they would be this SHIZNIT.
With PC games, every online games comes with server version. The server version is NOT for game-play and can only be used to run a server.
Now the question is this: Is the server version on the disc with the game title, or is it on the MS Live servers.
If they are on the disc, then there would not be much use for a M$ Live Server other than to relay the packages from one XBOX to another Xbox.
It makes more sense to me that M$ has the game creators make a server for their games which is to be hosted on a Live server. This would mean the Live service is just a bunch of computers running XBOX title game servers, and that when you connect to Live it is similar to connecting to XLink Kai. you join a chat room, meet someone and start a game.
To run Live this way would take WAY TOO MANY severs. So I propose that M$ Live is run exactly like XLink Kai. XLink Kai is just a chat room to meet gamers. When two gamers are ready to play, it tells one of the XBOXes to start a game/server (on player 1s Xbox), then tells the server that another player will join (player 2s Xbox).
(If this is in correct, someone from Team XLink correct me.

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This way M$ can untilize the power of the XBOX instead of having to spend tons of money on computers that will run the game servers.
I theorize that XBOX Live is nothing but a credit card charging MSN Messenger! Basically charging people to connect over the internet. It's probably not any different than the xbox system link.