An internal Microsoft email has revealed that the upcoming Xbox does not require an always-on internet connection to operate, quelling fears of a Xbox that is unuseable without internet.
An internal Microsoft email for employees working on the next Xbox has revealed that the upcoming Xbox will "deliver the future of entertainment while engineered to be tolerant of today's Internet", and that "…[t]here are a number of scenarios that our users expect to work without an Internet connection, and those should 'just work' regardless of their current connection status. Those include, but are not limited to: playing a Blu-ray disc, watching live TV, and yes playing a single player game."
While we could not ensure the validity of the email, but if its true, it can be said that the upcoming Xbox will not forcibly require an internet connection and that the it will be equipped with a Blu-ray drive and live TV capability. It is also important to note that the email only clarifies that the upcoming Xbox is offline capable, but does not cover how offline capability will be implemented. Thus, it might be possible that some features (E.g game installation) may still require the internet to prevent piracy.
Source: Ars Technica