Not that you’re in a mood to be schooled, but the “Xbox” component is the “live” or online component of the sim. MSFS uses what was formerly known as Xbox Live for its online multiplayer functionality. It manages your gamertag, social connections and player-to-player interaction. It may also (probably is) tied to authenticate to the various servers that serve all the various live data, too.
In other words, it’s a key component of the entire sim.