The XBox account grants you authorization to use the underlying services that gateway you to the MSFS servers that host the backend of the game, meaning streaming Bing Maps, Photogrammetry, Live Weather, Online AI Traffic, as well as establish client side information so the latest updates can be pushed to your installation during program launch.
Notably, XBox gaming as an ecosystem is where MS consolidates gaming related services including Windows based games under the XBox for Windows brand.
This should all have been obvious from last night’s XBox Services outage.