it's looking like the "always on" for gaming actually applies to the rumored $99 Xbox 360 console since it doesn't have an optical drive and is meant to counter AppleTV, Google TV, Roku, etc.
Microsoft is working hard in its new strategy for the next years. The company wants to expand its Xbox brand with two new Xbox. One would be next-gen, the other one would be a new redesign for Xbox 360. Take in mind the Wii Mini, MS would like to offer something similar to Nintendo. This cheap model would be focused as a set top box product, although you will be able to load games too, but the games should be load directly from the HDD. This Xbox wouldn’t have disc drive.
When the Durango (game machine) launches, it will not support backwards compatibility for 360 games out of the box. Instead, this functionality will come from the other unit that will be networked with the Durango to provide this (not unlike the DVD add-on for the original Xbox).
The purpose of the smaller Xbox unit is to compete with Apple TV, but also provides XBLA and 360 game support which will give it an edge over Apple TV. The rumors of “always online required” comes from the smaller Xbox unit which may not have a disc drive and like Apple TV it would require a network connection and internet to provide any real functionality. It may be possible they will design both consoles to be stackable.
Durango itself will also always be online like any other device (correct with rumors), but it will not be a requirement to play local content and it will not prevent playing used games. Putting in an Xbox 360 disc into Durango will prompt the user to attach the supporting device that is sold separately. By separating the two devices and their functions it will ensure price competitiveness for both pieces of hardware. Microsoft’s delay in announcing these products from April goes more inline with not having a physical set of devices to show (among specification updates), which should be ready by May or June when this information is officially released.
So if all this is true, lets assume it is for now, then the big question is will the Durango (next XBox) be backward compatible with being able to network to older X360s that owners own now, or do these X360 owners have to upgrade to both the Durango and updated X360 model to be backwards-compatible, and play their last-gen games?