Taken From  Stephen Toulouse's Blog:

"We received a complaint on the Gamertag and determined that it did indeed contain sexual innuendo. Granted, there could be an argument that the text is not pejorative to homosexuality and should therefore be allowed. But there is no context to explain that.  Gamertags are visible to everyone and it would be hard for me to defend to a parent of a young child who saw it that the name did not contain content of a sexual nature.
We do not take action based off the number of complaints, or how often people complain in a given day. Whether it's one complaint or 20, we will look at it the same way. 

To answer the question another way, yes 'TheStraighterGamer' or 'TheHeterosexualgamer' would have gotten the same treatment and would have been found to be in violation and forced to be changed. We've actually done that to tags like that before.  Racism, hate speech, bigotry, homophobia, all these things have no place on Xbox Live and are in violation of our Terms of Use and Code of Conduct."

As for why the GayerGamer was banned but GayGamer was not, I can only assume that no-one has complained about the"GayGamer" account.  They will only ban you if they receive at least one complaint.

-- mostly harmless

@Monte

It is neither of those. The ToS on Xbox Live clearly say that there may be no sexual innuendo or sexual reference in your gamertag.  So announcing yourself as "gay" is breaking the rules, plain and simple.  You are also not allowed to announce that you are straight.  Your sexual preference just has no place on a system designed for young children.

I do agree though, that kids (especially US kids) are incredibly racist and homphobic over the voice coms in games like COD4 and Halo3.  But that is what voice banning is for ;)

-- mostly harmless

By the greater Xbox Community, they mean that enough people used the XBL feedback tool to say that the persons username was offensive.  If enough people claim it's offensive and there's a questionable word in the name MS will send them a notice asking them to change their handle.

In this case people theGAYERgamer played with complained.  The guy with the gaygamer handle hasn't received the same complaints.  Nothing to do with Microsoft being homophobic or not.

First, there seems to be some confusion over what happened. He was not banned, he was made to change his gamertag before he could log back into XBL. (A service that usually costs 800 live points, BTW.) Microsoft doesn't monitor Silver and off-line GamerTags, they only enforce improper names for Gold Accounts that can play online. Meaning that this guy was playing games, online, with other people, most likely strangers, strangers that could be any age.

Everybody that is defending this seems to be stuck on the 'gay' aspect of the gamertag, (intentionally, it seems) ignoring the fact that it says GAY-ER. As in, more than. As in, more gay than potentially other gay gamers. The problem isn't that he is gay, because Microsoft doesn't care who you are as long as you're giving them money. (Heck, you could be a purple transexual and from the moon, and Microsoft wouldn't care as long as you paid for the gold subscription.) The problem is that the gamertag is BAIT. There is no innocent intention here, he clearly meant for the name to be provoking.

XBL is a lot like YouTube as far as GamerTags are concerned. Microsoft rarely monitors the names themselves except for a few key terms that they'll ocasionally search the database for. They're mostly dependant on community self regulation. The reason why he was made to change his title was more than likely because enough folks in the community filed a report on an inappropriate name. And just so everyone is clear, it takes A LOT of people complaining about your gamertag to have Microsoft intervene. Not just a single 12yo playing Halo3, or a small group of  homophobe jerks playing Rainbow6.

Also, of all places to declare your sexual preference in life, your XBL gamertag is not the place to do so. What? You're going to pick up dudes on XBL? Srsly.

That's not really cool on on Microsoft's part. But I can see how this might have happened.

Admittedly, most gamertags with the word "gay" thrown in there are most likely to be offensive and deogatory in some way. Still, I don't think this one should be banned.

Well "GayGamer" is still up, otherwise I'd think it was both sad and hilarious that they'd label gay people possibly making gay gamertags as offensive but not even bat an eye at the swarms of 14 year olds who continually bark "faggot" at each other while playing teh Haloz.

As has been said, it seems the issue is not one of "homophobia" or of MS pushing any particular agenda but of them enforcing what would seem to be a quite legitimate rule regarding Gamertag names: that they not refer to anything sexual.

Now, I can't say whether they apply this principle effeciently and universally (clearly their system for banning those who abuse the voice-chat system is less tightly policed), but I for one see no problem with this.  As a gamer, I play XBL and other online-games to get away from all the sexual, ideological, political and other heavy stuff that I have to deal with everyday.

I remember one day while playing City of Heroes I got grouped with a female avatar with a decidedly pro-choice name and theme who would, in addition to having a Battle Cry about a woman's right to choose. spend considerable time debating the finer points of Roe v. Wade with other party member.  Understand, I have no problem with her position - I support it.  But when I plug in the PC or console, I don't want to have to deal with all of that.  I suspect - and hope - that a similar desire is behind MS's treatment of this Gamertag issue: they want to create a fun environment as far removed from contentious, real-world issues as possible.