According to Danger Room, Microsoft refused to sell consoles to Roger Smith, chief technology officer for PEO STRI, the Army command responsible for purchasing training equipment. Why wouldn't Microsoft sell them consoles? Well, according to Smith, three reasons:Yes, anti-military Mom & Dad's wouldn't like it, so?
* Microsoft was afraid that the military would buy up lots of Xbox 360s, but would buy only one game for each of them, so MS wouldn't make much money off of the games.
* that a big military purchase would create a shortage of Xbox 360s.
* that if the Xbox became an Army training device, it would taint its reputation. Microsoft was concerned that "do we want the Xbox 360 to be seen as having the flavor of a weapon? Do we want Mom and Dad knowing that their kid is buying the same game console as the military trains the SEALs and Rangers on?" Smith told me during an interview for Training & Simulation Journal.
Lots of comments at that site, these two are especially interesting:
h/t Good Richard