Instructions
Sign up for Xbox LIVE. During the sign-up you will be asked to choose a unique gamertag. At this point, you can create a brand new gamertag or, if you have a gamertag you have been using somewhere else, you can now associate it with your Xbox LIVE account.
Recover a gamertag from another Windows LIVE or Zune account. Open your Xbox guide and choose "Recover Gamertag." Enter the ID and password for the account you are taking the gamertag from and follow the onscreen instructions. The recovered gamertag will now be associated with the Xbox LIVE account.
Change your gamertag. You are allowed to change your gamertag once for free. After the first change, any additional changes will cost points. Sign in with the gamertag you want to change. Go to "My Xbox," select your gamertag, and select "Change Gamertag." Enter your new gamertag or see suggestions if you aren't sure what gamertag you want.