My first reaction was 'how the hell are they going to cover everything'? Then I read this:
It's worth clarifying that this isn't a full hunt for all desktop software. Microsoft's Services Agreement doesn't cover Steam itself, or any other third-party desktop apps you have on your computer. It does, however, include all Xbox and Windows Games published by Microsoft.
So I'm not TOO bothered (until they're going to look for pirated MP3's and movies, that is

). But the following is also rather worrying:
"We may automatically check your version of the software and download software updates or configuration changes, including those that prevent you from accessing the Services, playing counterfeit games, or using unauthorized hardware peripheral devices. You may also be required to update the software to continue using the Services."
Didn't they shut down games windows - live because it was too obtrusive? If I want to use a third party hardware thingy, I'll do it. They shouldn't interfere with that, IMHO.
But again: as long as they just do it for their own games, I don't mind too much. If they want to end up on my to-be-ignored-list (current population: EA), then so be it.