The reason Xbox can 'get away' with it, is they are still the best console multi-player option around.
Shamus is right, the reason the Wii has been so successful has been the price and the gigantic age group that will play it. However, Nintendo will never rise beyond that success, is the giant audience they targeted, for the most part, don't buy games on a monthly or even semi-annual basis. My grandparents bought a Wii, they bought Wii Sports and Wii Fit. They've never bought another game. Wii has free multi-player but not enough games built for multi that make that the reason to own one.
Playstation also has free multiplayer and they have some solid titles, however, they don't have Halo or Gears of War. Now maybe only frat boys and 10 year old kids who just discovered curse words buy those two games, but they'll buy every single one they release and act like it's the greatest thing since sliced bread. Modern Warfare 2 sold over 7 million copies the first day and over 55% of that was on the 360, 33% on the PS3. Don't get me wrong, I know there's a lot more to gaming and console gaming than just FPS titles, but if there's one genre that multi-player is the focus, that's the one.
As for PC gaming, it's not even in the footrace anymore, it's just holding on to what it has. 20 years ago, FPS was dominant on PC and a rare sight on a console with usually poor controls. 10 years ago it was getting closer to an even match up, and now any FPS title comes out on a console, and than maybe also on a PC, honestly, what's the last exclusive PC FPS title? In a gaming age where developers are afraid to dump millions of dollars on anything that's not a sure bet, PC gaming is mostly the next MMO or the next RTS coming out as those remain the only two genres that the controls or the number of players is far better than a console, and in 10 years I'd be surprised if consoles aren't top dog on those too.
Xbox for whatever the flaws it has, truly falls in it's own niche between the Wii and the PS3. It's more expensive than the Wii but i'll buy 20 or 30 more games for 360 before Wii has another title I could care about. It has better multi, even if you have to pay for it. It was cheaper than Sony at release (and still cheaper now even though they've both gone down)and it has more big name titles than the PS3. Now, Sony is catching up in that department, but they still need an exclusive title that gets everyone's attention for awhile.
So, I think Microsoft is raising it's prices because they can, because most people will grumble quietly to themselves and pay it anyway. As for me, I find it annoying and greedy, but yeah, i'll probably pay it anyway.
(Oh, and I have all 3 consoles and a PC game and I play games on all of them! Except the Wii, the Wii mostly sits there sad and unused urging me to pick up the new Mario title.)