Microsoft has taken steps to improve Xbox Live security.
Microsoft recently implemented a few changes in Xbox security measures for customers. Xbox Live General Manager Alex Garden outlined these changes in a blog post on the official Xbox forums:
"We’ve increased notifications to members whose accounts may be compromised to add proofs, update their passwords, and, if necessary, contact Xbox support," he said. "This helps our team lock down an account quickly, investigate and restore the account to the rightful owner."
Other changes include taking legal action to pull down online posts of gamertags, usernames and passwords gathered from malware or phishing schemes to help protect members, as well as sending out unique codes to the security phone numbers and secondary email addresses provided by members to verify authorization for Xbox.com purchases or account change attempts not stemming from a member’s trusted device.
Garden then urged Xbox customers to help themselves stay secure by updating their Live information. Though Microsoft has updated security measures, including added measures incorporated into the spring update, they'd be useless if customers don't have up-to-date information when dealing with security issues.
Garden ended his post with common password tips, which include changing passwords frequently, not sharing the same login information across multiple services, and using passwords that aren't easy to guess.
To read Garden's full post, direct yourself here.

if you are that damn stupid to say your password, honestly you deserve it.
if you are that damn stupid to say your password, honestly you deserve it.
So let's not do anything to increase security at all, in fact let's stop all attempts at reducing spam, viruses and trojans, because it's always the customers fault
/not funny
Many of those things will hurt everyone, even those who don't do something wrong. If you send your password to a scammer, you're only hurting yourself.
You wouldn't spot Subtle Irony if it was painted bright orange, riding a unicycle through Grand Central station, playing a one-man-band and singing "Subtle Irony is here to stay" through a megaphone.
Almost always. Typing your password to someone else definitely is.
Problem: idiots that have their password as some random, common word will end up with a bunch of censored messages. You would also have to parse out everything that is typed into chat, hash it, and verify it against the MS account database for every message typed. That would get bogged down fast (and then groups could DDoS the database by spamming incoherent messages)
Not a good idea !
Seeing that most folks use a 'real word' that would come up in a conversation the "****" would be a dead giveaway as you can guess the word based on the context.
And that would mean either that the password have to be stored normal and that would mean less security in the end or each and every word typed would have to be salted and hashed and then checked if it matches the stored encrypted one and that would kill the server performance. Good idea thoo.
Another form of privacy protection I take, which is a little more extreme: Prepaid credit cards. Inexpensive, and can be obtained at nearly any financial institution. With this, you can load the card with only certain amounts of money (specific dollar amounts for purchases, etc) and keeps unauthorized users from spending all your cash in the event of a security breach.
Those are steps you can take to cover your own ass, and this way you're completely self-reliant in that aspect. Either way it goes though, we live in a digital age. In no way can any company offer to completely protect your private and vital information so therefore it's up to you, as the consumer, to take matters into your own hands. This applies to any company.
Be a smart online shopper/player. Do that and you don't have to worry about these issues.