This isn’t a “cut your cable” announcement, from what I’m hearing/reading. It’s more like Xbox becomes your streaming -content adapter for your TV (as the Seattle Times describes it).
Microsoft timed the announcement to happen at the TVNext 2011 conference in San Jose, Calif. The new Xbox Live TV offering is key for Microsoft, given that there’s no new version of Windows out this year, so Xbox, Kinect and Windows Phone are likely to be its lead-off products for the holiday selling season.