1) What is Xbox Live?
Xbox Live is a place where you use your Xbox360 and connect it to your ISP and voila, you're there, together when you'd register yourself with gamertags. From the Xbox Live you can download some game demo, old school games, share your games results, chatting, social networking, etc.
2) How Xbox Live works?
Depends on your consoles version and country, there are two (if not mistaken) servers that you'll be connected. Either Xbox Live Japan or U.S. Accounts are differentiated as well whether you're an U.S. account or Japan. Most of the servers content are identical unless there's exclusive (especially Japan in Arcade). If you're using U.S. account then you'll get U.S. servers content, and so on.
Everything in consoles (be it Wii, PS3, 360) are solely not just a mere simple consoles anymore. With online you can chat, multi-player, download old school (memorable) games as well. Each consoles has their dedicated servers and version of online, where Microsoft called it Live.
4) Where's Xbox Live available?
Is available in 26 countries, it just see which version of consoles and server that you're at. I have an Asia console and I'm connected to Singapore and Japan server. As long you have the account, ISP and console. Is that simple.
5) When's Xbox Live available?
Live is available for a long time ever since the first Xbox console are out. You can check on Wikipedia if you want to read more about the history of Live.
I'd try to download some trial games on arcade and game demo. IMO, it is a nice and interactive place. Not only you can browse for games,even you can add community via Facebook and MSN. In fact Live has made it like iTunes store where you can download games digitally without the hardcopy. But one thing still doubt me is when I'd made a purchase a particular game/video, if I accidentally deleted it,would I be able to get it back for free?
On the other hand that I would like to praise about Microsoft for their 360 compare to Wii. No fanboy here. I'm not comparing the graphics and games. I just want to raise my opinion about the game availability. In fact they did it well. Why? DVD has NTSC-U/C, NTSC-J, and PAL. This is the common. So for Wii's case here's the catch. Japanese games goes to NTSC-J consoles ONLY and vise-versa. Common, some of the games (e.g. SuperRobot Taisen) are big hit across the N.A. So why you want to limit your market? Do you think consumer like us will buy another new console just for that particular version?
Now here's the good thing about 360. In fact they made some open region games (which every version console can play along). Just like my NTSC-J console can still play NTSC-U/C games as well (as long it is stated there No Region Protection). I can play Asia version and Japan game as well. Yeah!
For my case, i'm more interested on arcade game and some free video demo. Not playing 360's game using Live. Why? Due to my country's inconsistency of internet speed, if I am to play shoot-em-up game, i'm sure I gets the blame ' cause i'm lagging other people's gameplay as well. Tried with Winning Eleven 2010 where I pass my ball, 2 seconds lag. Where's the fun?
The reason why Malaysia have to keep up playing original is due to the online contents and multi-players availability. I'm sure some of their 360's has been banned from Live,so when is ban, your 360 is like half dead.
My suggestion for future 360 owner,get original 360,become a silver (if you can afford gold, go for it),save money to play original,you won't regret. If you can't afford new game that cost RM180 (almost USD50) LIKE ME,go for arcade game. Cheaper and fun too. No headache of getting ban,flashed drive,D.I.Y backup games (I'd wasted 5 dual-layer),modded chip,future updates,etc. Video games are meant to be fun,not headache. For my case,i think I'll get a new 'rumor' 360 slim if money permitted for Asia/Japan Live. So people,go for original,go for Live. I'll post my other console's online content when I get a hand on my Wii back and future PS3.