And the backlash was huge on reddit and slashdot, but almost completely non-existent among the general console game market.
Fixed This For You
Speaking with IGN last week, Whitten revealed that "like online, the console will still function if Kinect isn't plugged in, although you won't be able to use any feature or experience that explicitly uses the sensor."
That's pretty clear. It seems to be stating that you can actually unplug it, and that text you're quoting is probably describing the separate ability to turn it off in software.
The rule on staying alive as a program manager is to give 'em a number or give 'em a date, but never give 'em both at once.