Some consumers that try to login to LIVE who we detect have illegally modified their console will get an error code (Status Code: Z: 8015 – 190D) when trying to connect to the service. These users will not have their account automatically banned from LIVE, but they will no longer be able to access the service from the console they modified.
It’s hard to blame Microsoft for this one. Keeping the online playing field fair should only affect the cheaters. It seems that the console banning will affect those with modded firmware, so if you upgraded your hard drive through some hacks, you should be fine.
Source: Gamerscore Blog