WHY? There are many reasons why your Xbox360 could get revoked, but generally it means you have done something to piss off MS. So the best way to keep from being revoked? Don't do anything liable to piss off MS.
An example of a cause for revocation is the public sharing of your gamesaves or other similar files from your Xbox360 hard drive. This includes making publicly available "resigned" versions of these kinds of files. In order to be revoked you have to have done something that involves your Console ID so that MS has the ID required for revocation.
HOW? Revocation is done through the use of Console Revocation Lists (CRLs) such as the list posted above. If your console's ID is present in the revocation list, then your console has been revoked. There are two types of CRLs, static and dynamic.
A static list refers to a list that is saved onto the flash inside your Xbox360. This list is updated when system updates are performed on your console. The Fall'08 update contains an encrypted version of this list in the file "$SystemUpdatesu20076000_00000000data.bin". When the list is installed onto your console another layer of encryption is added using your Xbox360's unique fusekey and the result is saved to a crl.bin file on the internal flash.
A dynamic list refers to a list that is sent to your console when you connect to Xbox Live. This way an updated revocation list can be employed without requiring a system update.
SO WHAT? So what does it mean to be revoked? Will I even notice or care?
From what I can see so far being revoked means that your console loses its "license to sign". Data that is generated locally on your Xbox360 gets signed by a key unique to your Xbox360. This data includes Gamer Profiles and Saved Games. Being revoked does not mean that you can no longer sign this data, just that other Xbox360s will no longer recognise anything that your Xbox360 signs.
In short this means that if your console gets revoked you can no longer sign into a profile created on your Xbox360 on a friend's Xbox360, nor can you use any gamesaves that were created on your Xbox360 on a friends Xbox360.
For most people this wouldn't be much of an issue, however there could be further ramifications that I have not come across or thought of. I do not have a revoked console, so I cannot perform tests to see what a revoked console can and cannot do. Please note that the following are *guesses* at what may happen, and are not fact.
I do not know how Xbox Live treats consoles with respect to being revoked. Possibly being revoked could cause you to be unable to connect to Xbox Live, or appear invalid to other gamers and therefore be unable to play an online game with anyone.
Another possible problem could be sharing of locally created data such as user generated levels etc that you create for a game and then upload for others to use. I would assume that such things would also be locally signed with your unique key, and so other consoles would not recognise it as being valid. There is also the potential for revocation to affect other aspects of the Xbox360 totally seperate to signing, however signing is the only place I have noticed it being used so far.
CONSOLE ID? By now you may be wondering what the Console ID is of your Xbox360. There are 3 ways to find out.
1) Go to the "System Settings->Console Settings->System Info" screen on the Xbox360 dashboard and enter the Console ID displayed on this linked page.
2) Go to the "System Settings->Network Settings->Configure Network->Additional Settings->Advanced Settings" screen on the Xbox360 dashboard to get the MAC address. Then look on the back of your Xbox360 near the power socket to get the Manufacture date (YYYY-MM-DD format). Enter these on this linked page to generate your Console ID. (Note: This is how your Xbox360's Console ID is initially created by MS)
3) Retrieve a gamesave file from your Xbox360 hard drive or memory card and open it in a hex editor. Ensure the first 4 bytes are "CON ", and if so then your Console ID is the 5 bytes at offset 6 in the file.
Note: the savegame file MUST have been created on the Xbox360 you want to get the Console ID of otherwise it will contain the wrong ID.
If the save game file has the following data:
43 4F 4E 20 01 A8 11 22 33 44 55
Then your Console ID is: 1122334455
The general format of a Console ID is shown below:
Console ID Format: ?MYm3m4m5C
? = Unknown (4bits). Usually this is 0, but some revoked IDs show a 1 or 2 here.
M = Month of manufacture (4bits)
Y = year of manufacture minus 2005 (4bits)
m3 = MAC address byte-index 3 (8bits)
m4 = MAC address byte-index 4 (8bits)
m5 = MAC address byte-index 5 (8bits)
C = CRC over Console ID (4bits)
The information on Console ID generation and format does not really matter to most people. Hackers, however, delight in finding the intricacies of how things work merely for the sake of knowing. It is for the hackers then that I post this extra information.
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