http://www.engadget.com/2008/07/14/netflix-on-xbox-360-and-falls-revamped-dashboard-guide-detail/
"Netflix
For now, Netflix will only stream in about-SD resolution.
As Netflix transitions to HD, Microsoft said it stands to reason that streaming HD to the Xbox should be feasible. (Read: eventual.)
Netflix will be for Xbox Live Gold members only, so you'll be paying that $50 per year if you want it.
Netflix video sharing ONLY works with other Netflix / Xbox Live Gold subscribers. You can't share video with a Silver member, or who doesn't subscribe to Netflix.
Microsoft doesn't seem to have concerns about redundant content between Netflix and XBLM, or Netflix cannibalizing XBLM sales. Makes sense -- if you had content available to rent or stream with Netflix, you probably weren't going to pay to rent it on XBLM anyway."