Judging by what appears to be an internal Microsoft email for employees that are working on the upcoming Xbox Next, aka. Xbox 720, it appears that it will not actually need an always-on Internet connection after all.
The e-mail notes that there are a number of scenarios that users expect to wrok without an Internet connection which include playing a Blu-ray disc, watching live TV, playing a single player game and that these should "just work" regardless of current connection status.

While the validity of that email can't be confirmed it is quite likely that Microsoft will stick to similar model. On the other hand it is quite possible that some features, including game installation, might still require an Internet connection in order to ensure lower piracy chance.

In any case, we will be sure on May 21st, when Microsoft scheduled the big Xbox event.

Source: Arstechnica.com.