The X-Box version of the chip could easily be modified to have an on/off swicth, this would allow you to play X-Box Live without having to worry about the Microsoft S.W.A.T team busting through your windows, celing and doors as soon as you logged on.
However, apparently, their magical servers of doom could detect your increased HD, and again with the Microsoft gestapo hauling you away never to see your family again.
How much of that was actually truth and how much was just propaganda spred by Microsoft to keep you too scared to log on with your modded console is another.
I think I will just wait untill they release the Freeloader disks, like they did with the Gamecube, that was a bit less drastic than chipping your Gamecube and you could play NTSC games. Pirated games I'm not so bothered with.
EDIT: Also this is close to release and sounds a bit better than the other one,
http://www.maxconsole.net/?mode=news&newsid=13934