Microsoft will be allowing any user to develop Xbox 360 games via a $99 subscription fee and their XNA game development platform. A lite version of the platform, called XNA game studio express, will be available to all users of Windows XP for free, with the $99 subscription price going towards the ability to test and share the games on 360.
As of this time there is no plan to make user made games available over Live, but that may change.
[url=http://www.gamasutra.com/php-bin/news_index.php?story=10458]BREAKING: Microsoft To Enable User-Created Xbox 360 Games[/url] (Gamasutra)