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Xenostar said:

its easy, for friends it displays your real name, for people not on your friends list it displays your gamertag. 

yeah that would be good most of the time. but it could be bad in multiplayer matches if you see the real name of your friend and other people in your team the gamertag because it would be bad if you wouldn't know the gamertag of your friend to tell other people to go with him or whatever  

something like they do in halo would help then.