Wasn't there something like this on the Xbox 360 as well? They used to ban accounts and consoles of people with modded 360's. This could just mean you can't connect to Xbox Live, not sure. Obviously if you can't connect to Xbox Live, you can't use any digital games you own, but I would think being offline, discs would still work. I have no idea on any of this though, I never had a console banned, or even an account ban/suspension.