Ugh, neither of those two things really had much to do with what he said.
The only things that can run alongside that are really seperate from the game (so trainers don't count) or kernel debugging is xbdm.dll used with a debug BIOS. It allows you to grab pictures, videos from the game, send and receive files to the xbox, change the time, change data values used by the current game or program (much like a trainer), start other programs or games, be used to develop games along with the full XDK, and more.