It's per-game right now, and a limited selection is expected due to rights, etc. Downloads the file from the servers when you put in the disc. On the plus side, it allows for system link between all three generations if the game is compatible with all of them. No word on Live functionality, but it isn't expected imo.
I have a theory on that, Remember the guy on here that was working on bringing the OG LIVE back? iirc he stopped working on it when he was hired by MS for something, Then a few months later we get this OG compat announcement along with Crimson Skies as the game shown, a game remembered for its online. [Insert spoopy xfiles theme] I think the OG LIVE will be emulated in some way or was ported to work with the XBO if not 360 LIVE.
yeah I'm with borman. it's probably going to be per game. They're probably going to be selective with which games are available. Publishers wouldn't want you buying an old copy of Halo 2 instead of master chief collection and such. the of xbox compatibility may have been my favorite part of e3. the room blew up when that boot screen blob came up. lol