Maybe Microsoft is taking its cues from Sony Online Entertainment's and Playstation Network's launch of Free Realms, or maybe the whole story is the stuff of rumors.. According to "trusted source" speaking to IGN, publishers and developers will be able to release games for free on Xbox Live. Developers and publishers will then be able to allow users to purchase content such as weapons, experience points, in-game currency, perks, and novelty items. The first of these titles is expected to arrive next year, according to the source.
While that is fine, next year seems like a very long time to wait to bring free-to-play to Xbox Live. Microsoft is notorious for controlling micro-transactions on Xbox Live, so it is doubtful that it has suddenly changed its policy. More likely, if it does allow for free-to-play products they will be of the first-party nature.
Still it's an interesting rumor and a business model that continues to gain popularity. Sony has already embraced it and Microsoft would be smart to follow suit.