While you have seen those ads for sites that supposedly generate real Xbox LIVE codes for points and other stuff for free, apparently one of them was actually real this week.
Microsoft suffered a loss of $1.2 million dollars in Microsoft Points and other redeemable codes before Microsoft was able to close the site down. The rumor is that some hackers had figured out a way to create valid working redeemable codes by changing the number values of older used codes.
The site was apparently generating codes every time the page was refreshed, but it finally buckled under the extreme demand. The more hardcore hackers were apparently using a program that was able to generate codes for Microsoft Points, 48-hour Xbox Live Gold Trials, and Halo Reach add-ons, which we believe were Reach Avatar items.
Of course, Microsoft does not want to currently talk publicly about it, but rest assured that they are going to throw down all of the legal might they the can when they find those responsible. Someone will have to pay; just glad that it isn’t us.