While this is good news for consumers, I agree that this calls in question Microsoft's entire console strategy of Always Online with the Power of the Cloud. If you don't have your console connected, will there be a discernible difference with regards to the player experience? If you are to believe the PR, complex calculation were to be handed off to servers in order to deliver a grander and more rich playing world. Whether that be more objects on screen, NPC AI calculations; that much was never fully specified.
If this is all true, does that mean that games will fundamentally change the user experience dependent upon whether or not the console is connected? Either way, I think this is going to result in lots of questions that Microsoft will either avoid like the plague, have to admit to tiered user base experience or admit that it was all unsubstantiated PR*.
*the last option is that Microsoft say "well you don't get the cloud anymore because you were mean to daddy and didn't want it to be always online. You only have yourself to blame. Stop crying or Microsoft will really give you something to cry about. You can have the cloud back when you give daddy your rights like he asked. But only then, not before."