It's hooked up by a wireless router that microsoft makes,
or directly to a broadband cable,[which is an Ethernett port right on the back],
You synchronize your hotmail/live email account to your XBOX live account,
and then you get a "Silver" membership,
Which lets you send messages,
But that's essentially it,
The XBOX Live network is currently the best,most accessible online network for a console.
There's way too many games that aren't rated M to list that are good,
You just kind of have to snoop for them,
As for memory,
You can install games now,
So if you plan to install games,or buy lots of downloadable content,
Definitely go with a bigger hard drive,
If not,
20GBs is just fine.
You can add friends by their Gamertags,
Or by a list of recent people you've played with/against.
You can also chat with people on MSN or Yahoo if you synchronize your account.
You can get Microsoft points,[like nintendo points]
Which allows you to download videos,arcade games[which are like wiiware],and content for your games,
You can customize your avatar,[a little guy that actually looks pretty stupid to be honest]
There's two levels of online,
Gold and Silver,
With Gold,
You'll get early access to demos,videos,and there's just plain,
Way too many incentives to upgrade,
It costs around $8 for a one month,
It costs $20 for 3 months,
It costs $50 for a whole year.[and there's usually a bonus month for buying a one-year membership]
It's actually pretty neat,
But if you haven't got any dough,
It's just a lot of gimmick crap.
As for playing with other people,
There's no hassle,like no friend codes to collect,
It's on a big network,
And you can find people by their emails or by their gamertag,
There's usually a lobby when you play with other people,
And you can chat with a headset[which is included in the package].
I don't know if that's as detailed as you'd like.