I created an XBLIG last year in August 2010. I am happy to see some of my developers such as Radian Games be so successful now. Radian games just released a game under Chilingo the Angry Birds publisher. While XBLIG is always the subject of debate among indie developers, the services is luke-warm in terms of features and success.
Let's start with the good
So imagine you are 10 years old and you somebody says to you that 15 years later you will make your own game for the leading console of the time. You are playing Megaman trying to get to the boss and you are thinking to yourself "No way, I don't think that is going to happen". Well thanks to XBLIG you can. You can produce a game for the leading console today. If there is any reason to produce a game for XBLIG it would be to just feel a sense of accomplishment and say that you made a game and have it being sold on the XBOX 360.
On top of that, you can make money. There are a handful of games that have made 6 figures. There is even a game that has surpassed a million sales. So you can make money but not everybody can make money.
In addition, you get a ton of exposure. Lot's of bloggers and reviewers will review your game and that is a good thing. Anybody talking about your game good or bad is a good thing. If you develop a game for XBLIG you will get about 10 times more press than a game for iPhone or android.
The tools to develop an XBLIG are amazing. C# and XNA are awesome programming languages. These languages make game development so much fun. There are a lot of resources in the forums and they are easy to implement and follow. Also deploying to your XBOX is incredibly easy.
XBLIG is a great place to make your game and get some press for your game. You might make some money with it and it can be a gateway to greater success.
Let's talk about the bad things
Microsoft divides its game development into three parts: XBOX 360, XBLA, XBLIG. Each has their own rules and costs associated with it. XBLIG easily has the worst reputation. The reason is that there is a lot of shovelware on the service. Some developers have something like 60 small games on the service. There are a few really good games on the service but if you don't get featured your game gets clumped with the shovelware.
If you produce a game for XBLIG you get little or no XBOX features. You don't get achievements or in game purchases. This is a major problem if you want to make money. I don't really care about the reason why this happens. If you can't use these two techniques then it makes your game less competitive. Not having achievements is the worst part. I really, really wanted this when I was making Circa. If you can't use it then how are you going to get good at incorporating those features into games. You have to go to iOS to get this kind of experience.
You have to use XNA which can be problematic. The reason I bring this up is because there are some major limitations with XNA. While it is easy to use, if you are an experienced developer then there are parts of XNA that will drive you insane. Somethings are either impossible or ridiculously hard to do. You can code XBOX games in other languages. I wish I had this option
So if you are a hobbyist or just simply want to produce a game to add it to your resume, then XBLIG is the platform for you. I personally get a lot of "street cred" for my game Circa. I have easily made money because I have the game and not from the game. Basically it helped me make a living in 2011.
However, if you are serious about game design and development (which I am). I would suggest staying away from XBLIG and instead go to steam. The reason is simply because you don't have enough montization features.
I don't think XBLIG was ever set up to make money. It seems like it a place to get experience and not a place where you can make a living let alone start up a studio.
I'm glad XBLIG exists at all. It's a place where you can gain some experience and have a little fun with development. It is a great thing to add to your resume and will most likely help your career along. If you haven't made an XBLIG then what are you waiting for?