The only way I would ever let a child of mine play a game over Xbox Live with voice chat enabled is if Microsoft created some kind of magical audio filtering technology that could sense dirty words as they were being spoken and censor them in real-time. Good for them then, as the U.S. Patent Office just approved a patent from Microsoft for exactly that. Applied for back in 2004, the patent describes a method by which:
An input audio data stream comprising speech is processed by an automatic censoring filter in either a real-time mode, or a batch mode, producing censored speech that has been altered so that undesired words or phrases are either unintelligible or inaudible.
Personally I would prefer one that replaces offensive speech with happier phrases, but technology can only go so far. "Daddy, he called me a mother hugging rainbow pony!" Of course he did son. Of course he did.
Microsoft gets patent for real-time f-bomb bleeping [Ars Technica - Thanks Brandon!]