Microsoft can disable “counterfeit games” and “unauthorized hardware peripheral devices” according to the recently updated Microsoft Services Agreement. The agreement, which pertains to the Windows store, suggests they can detect pirated first-party XBox and Windows games you have installed.
“We may automatically check your version of the software and download software updates or configuration changes, including those that prevent you from accessing the Services, playing counterfeit games, or using unauthorized hardware peripheral devices. You may also be required to update the software to continue using the Services. Such updates are subject to these Terms unless other terms accompany the updates, in which case, those other terms apply. Microsoft isn’t obligated to make any updates available and we don’t guarantee that we will support the version of the system for which you licensed the software.”
It’s not clear what “unauthorized hardware peripheral devices” refers to, but “counterfeit games” means any first-party Microsoft published game. The service agreement wouldn’t cover Steam games or any other third-party desktop software, so there’s no reason to think they know about that illicit copy of Adobe Photoshop you’re harboring. The information is interesting amid other privacy concerns related to Windows 10, however.
Note: This story has been updated to correct which services the EULA relates to.