Yea, think Alien Homminid (sp?). That was a Newgrounds Game now on XBLA. And this article is stating that people paying the $99 a year to develop games will have their very own blade on the marketplace called "community games" and those games will be available to download for all 6 million Live users. I'm sure once Windows Live gets a bit more up and running, there will be even more users exposed to Joe Schmos game.
What everyone is missing is the opposite directions the gaming industry is being pulled. Sony wants this huge marketing, advertising, money making machine, much like the movie industry. They want the big exclusive games, and the exclusive format, the biggest numbers, the shiniest system, and they want you to pay absolute top dollar (think of the last time you went to see a movie, its about $15 for a one time view).
Nintendo wants to revert back to the good ole days, all while offering a completely new, although a bit gimmicky, way to interact with games.
Microsoft is going the music industry way. They have the huge bands like Epic putting out GoW, but they want the indie punk rock bands to be heard also. They hand everyone the same insturment, and they sit back and see who can play it well, and what is created, if seen as profitable, is priced and distributed accordingly. If its something like GoW, its big budget and priced that way, if its a Java style game, or a puzzle game, something of that nature, its put up on XBLA to maximize profit for all parties, while not over charging for the product.
There are points that I'm missing or leaving out, but basically, M$ wants to be the nurturing company that encourages homebrew development of games, that is why it is propritary and costs money. Hacking leads to pirating. Thats what seperates someone who truly wants to make games apart from someone that wants to backup games to their huge 300GB HDD and play any movie format they want.
As a community of people who are supposedly in support of homebrew, we should be applauding M$ for this announcement, as well as XNA Game Studios Express.