The problem was never that they would BLOCK used games, rather that they would charge people money for used games. Meaning that if you borrowed a game from your friend, you would have to pay Microsoft money in order to play the game that your friend had bought.
There has been newer info out that says that's not the case, you can lend your games out and in doing so you can't play it while that same copy is authenticated on your friends system. Once you get the disc back and authenticate your copy again then you're good to go. It sounds exactly the same as it's always been, no disc/cart, no play. The fact of the matter is that as time passes and we get closer to E3 these doom and gloom rumors are looking more and more like minor tweaks to the same system we've had since the start.