Since I can't post a thread due to my junior member status, here is the full breakdown + some theory filling in the gaps as to what MS has announced in regards to console operation so far.
Games have mandatory installation and can't be played off discs. Whenever a game disc is inserted and the game is not installed, an Xbox Live connection is required to initialize the install with a one-use key. On the first console you install the game on (main console that is associated with your account) the game will work for any user, and can be played without a disc in the console.
If the game disc is put in a console not mainly associated with your account, the game's install will be a limited one (where only your account is allowed to use it). If another user wants to play the game, they will be required to connect to Xbox Live and pay a fee (which is full price right now according to a statement). If the fee is paid, it becomes available to all users on the console.
Now for the second part. Everytime you log into your account, all the game licenses you have get activated for the console you're playing on (if this is your main console, it allows the game to be played by anyone, if it another, the license only applies to your account). This in turn sends out a deactivate license command to whichever other console had an active license for your games. So if that console happens to be connected to Xbox Live for a bit with whichever account, the games that are licensed to you will stop working right away.