Microsoft's DNS server servers are apparently failing to respond to requests, returning "no record" errors. This means that you can't access sites like Hotmail.com, MSN.com, and Live.com. It's unknown how widespread this outage is at this time. Currently msn.com, live.com, hotmail.com, and outlook.com, azure.com, and microsoft.com are all known to be impacted. It's very probable that all Microsoft domains are currently unavailable.
Do a search for "dns microsoft" on Twitter, and you'll find many people reporting the same thing. Could this be a load issue related to the Xbox One launch? Or are their DNS servers being actively DDoS (Distributed Denial of Service) attacked?
For those who are not experiencing an issue, it could be because the provider you're using is caching the results. DNS records utilize a "Time to Live" (TTL), and only ask the master server for an update once that TTL has expired.
A thread has been started in our forums, and you can chime in with your experiences below or at the thread (or both).
We're attempting to reach out to our contacts at Microsoft for comment and will update you if we hear anything.
Some are reporting that services are starting to be restored. We are able to (sorta) get to hotmail.com -- but not everything is working, as you can see in the screenshot.
The DNS servers appear to be responding properly now, and we will update the story when we hear a root cause.
UPDATE 1: Microsoft responded to us and gave us the following statement:
Microsoft can confirm that all online services have been restored. We are investigating the root cause of the disruption and will continue to keep customers updated as information becomes available.
If we hear more from Microsoft, we will be sure to let everyone know.