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Starting today, all Xbox Live members are eligible to apply for an Xbox Live Free account. Requirements are as follows:
-Must have no prior offenses or bans on your current Xbox Live account
-Limited to 1 Xbox Live Free account per console

Those who are able to gain access to an Xbox Live Free account must also follow the following guidelines:
-Maintain an increase in gamerscore of at least 15 per month
-Kinect© for Xbox 360 must be plugged in while the console is in use

Xbox Live Gold members applying for an Xbox Live Free account can convert their subscription into Microsoft points at the rate of 400 Microsofts Points for every remaining month of your subscription. Further requirements and guidelines may be applied to Xbox Live Free accounts and will be reflected in updates to the Terms of Service.

To read the Xbox Live Free Terms of Service and submit an online application follow this link.