The bans are only happening on certain applications from what I understand. It is because those applications are set for a minimum age that would violate the TOS if you swear, such as Skype (idk why but lets roll with that). A M-rated game will allow all the swearing in the world. Your Xbox Live account is still good apparently, just that Xbox Live account cannot use the particular app after it happens.
Banning people is a bit much, especially in apps that are considered private such as Skype. I think this also shows more insight into the direction Microsoft wants to move their products in terms of the design philosophy.