Xbox live has been and still is experiencing issues with the servers, due to being the holidays and all the new accounts being created the servers have crashed.
Microsoft issued a statement last night saying that they should have the servers up and running by midnight, but i would give it at least through the weekdend, if you can connect to live feel lucky because most people cant.
The system can be experiencing many issues such as connectivity, redeeming points, recovering gamertags.
Just give the system some time to get fixed and please do not call 1004MYXBOX for questions regarding this, thank you, its giving me a headache