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“Microsoft Points are the currency of the Xbox Live Marketplace, Games for Windows – Live Marketplace, Windows Live Gallery, and Zune online stores. The points allow users to purchase content without a credit card and to reduce the number of small credit card transaction fees, which Microsoft would otherwise pay.Some downloads on the Xbox Live Marketplace are free, but most other downloads, such as full versions of arcade games and downloadable content for some games, cost Microsoft Points.”
Read more about Microsoft points on Wikipedia