The Microsoft Xbox Live support team did not have a quiet holiday as the Live service is still having problems that started on the 23rd of December.

Major Nelson, 'spokes blogger' of the Xbox Live team detailed the issues they are having in this post.
Apparently signing in, matchmaking and account recovery are mostly affected. The service has not been entirely down though.
He acknowledges that the problems are not acceptable and says that the whole Xbox Live team is working on the resolution day and night.

Based on our access stats for 'Xbox Live Down' queries yesterday, lots of people have been affected and/or wanted to play on Xbox Live.

The Xbox support page currently has the "Users may experience intermittent issues logging onto Xbox Live,..." message up.

As Engadget already suggested Microsoft is in debt to offer at least a month free after this holiday service disaster. Apparently Zune marketplace is now also experiencing problems.