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Misconceptions
Microsoft does not specify a minimum connection speed for Xbox Live, instead stating that the service requires "high-speed Internet." Nowhere in official Microsoft literature does a speed requirement appear.
Significance
Users anticipate smooth online gaming based on the performance of their Internet service providers, which explains the need to know a speed minimum. However, the only relevant definition may be the FCC's classification of broadband, which is 200 kilobits per second or more.
Warning
The above FCC definition, if followed, would make for very slow gaming on your Xbox 360 by any measure. Additionally, almost all providers have been able to exceed these speeds since before the original Xbox arrived on the market.
Expert Insight
With services offering 3 mbps, Xbox Live connection speeds should not be an issue for most users. However, a minimum of 1 mbps for a workable connection is recommended. The console can't connect to the Internet on dial up.
Effects
The faster and more stable your Internet speed, the more enjoyable your Xbox Live experience. Good, speedy connections limit lag and reduce your ping--or the delay between the game server and your actual connection. Conversely, slow service may result in disconnections. Many game servers "kick" players with slow speeds.
Prevention/Solution
Microsoft does suggest gamers connect their console to the Internet as directly as possible, meaning straight to the modem. Routers and wireless connections, while supported, may compromise speed and stability on any device, not just the Xbox 360.