Bit of a non-article here. There's no actual proposal on how this could be done without introducing a delay (though it could be less than radio/TV's 7 seconds) in speech messages. But delaying messages would be pretty annoying for gamers actually trying to have a conversation or coordinate actions in fast-paced games. You can't even really use prediction very effectively:

"You're a ni-" could end with "-ce person", "-fty caster", or something much worse and there's no way to tell until the person says it.

Any attempt to censor free speech(even in this context) should be met with extreme prejudice. It's a very slippery slope.

This also brings up the privacy implications.If they can detect when you swear then it's very possible they can detect certain other words or even transcribe everything. You should not expect privacy when talking on xbox live but the idea of cataloguing everything you say forever should give you goosebumps. They can use it for any purpose, trust me I know.