Or, you can pass on the license, in which case you can't play the game anymore, but your friend can. Now, supposedly these license transfers incur a fee. Possibly, who knows?
According to this story, you can't actually do that. The only way to transfer your license is if you sell the game to one of Microsoft's approved second-hand game retailers for a fraction of the resale value and they then resell it to someone else for near-retail, splitting their profits with Microsoft and the game publisher. You can't transfer the game to someone else and you can't bypass the middleman and their cut by reselling your used games on eBay or Craigslist anymore.