Well depending on how much money you have the cost of a game can be quite a lot and that *IS* one less game (that they doubtlessly get a cut from anyway), and playing games is why I bought the console. Besides the other thing to consider is that you need to pay for your internet (and to game requires a decent connection) already, the XBL fee is on top of that.
To correct what appears to be some misinformation however, XBL does *NOT* require a paid service to download demos, movies, or arcade games. You need to pay points for those things but "gold" is not required, I know because I use the free membership and have done all of those things. I have more games from XBL Arcade than I'd like to admit, some of which turned out to be truely horrible even when I tried the demo first.
In general XBL Gold Membership allows you to play multiplayer, and be eligible for XBL membership benefits like contests and give aways and such. The big selling point to their multiplayer is both it's alleged quality, and in addition to the contests and such that they periodically hold organized events like "Gamerchix nights", and get developers and celebrities to play with the public at specific times. Part of the arguement being basically that if you like think the Fragdolls, or some of the promotional models, or whatever are hot there is a chance with XBL that you can actually meet them in whatever game they are promoting. I haven't really checked out these events in detail since my interest is minimal, but they do spam my dashboard with that stuff as incentives to try and get me to pay them for gold membership (which I might do a month at a time when I get a new fighting game or something... usually I'm done multiplayer within a month).
Aside from the "celebrity game matching" I see no real benefit to this as free multiplayer has been something the PC has been providing for years. The PS-3 has ALSO provided it for free even though Sony is getting greedy and plans to start providing premium features to do the same thing. The basic attitude is that just because something was free, doesn't mean that they shouldn't start trying to wring MORE cash out of the players.
Honestly I think the support for XBL has motivated a lot of companies to get greedy (proving that stupid mainstreamers are ruining gaming more than anything else I can think of). It seems right now that everyone is trying to get people to pay for online. I've heard stuff here and there about companies charging for access to their servers for various games in the coming years, and of course there is the PS-3 thing, and while they say everything you can do now will remain free, I have my doubts that this will remain true in any practical sense. For all I know what they will wind up doing is simply letting you play the current games free online still but any new ones beyond a cut off date will require a premium membership or whatever. Either that or they will create something so integral to creating online that while "optional" will force people to pay to avoid being gimped... whatever, we'll know more as more time goes on.
Truthfully I have both a PS-3 and XBox360. I play games on both with some frequency (though admittely I play single player on my 360 a lot more). I'm not just ragging on Microsoft for the heck of it when I say that Gold is a complete rip off. However since so many people buy it, there is no reason for them to change it. At the most, gamers who want to play multiplayer will whine as they pay the fee. The only way for them to change would be for people to stop buying it, and really I don't think the mainstream gamers supporting it are going to forego immediate gratification even for their own benefit.... Halo addicts alone would justify keeping it a pay service, and there is no way your going to convince enough many of the fanboys to stop playing Halo for ANY reason, even self interest.