Microsoft has introduced the Xbox Enforcement United Programme - one that let's us be the judges of what is deemed as inappropriate on Xbox Live and what isn't. The Xbox Live Enforcement team is a team of people who officially work for Xbox and scour through thousands of complaints on a daily basis to determine whether or not people are breaking the Xbox Live Terms of Service (ToS). A majority of the complaints are offensive or inappropriate gamertags - some of which are blatantly obvious in terms of what constitutes as a disregard for the ToS - some are a little more inconspicuous - with people using slang or what is known as l33tspeak (substituting letters with numbers instead) - thus bypassing Xbox's own filtering system.
Xbox Live Team: We love that our community is smart and engaged, and we want to harness that talent to give you a sense of ownership on the service.
A system of controls have been developed to allow us to sample a certain amount of potential gamertag felony's per day - we get to decide whether we think they are violating the ToS based upon our knowledge of what's allowed and what isn't (a quick overview of this can be found by simply reading the ToS for yourself). The systems works by a kind of majority vote - multiple people will see the same gamertags and be asked the same question. If the votes sway one way in particular then action will be taken against that person or it won't - depending on what that vote is - however if it still remains neutral (i.e. the votes are both sided), the decision will go to the Official Enforcement team for them to judge themselves. The programme currently is only available to sign up to by those enrolled in the Xbox Ambassadors Programme however this is expected to expand to the public in the coming months. The sign up link is below if you are interested in signing up.enforcement.xbox.com/United...
* Currently only available to Xbox Ambassadors.