It's pretty much just for the bragging rights, you can't "cash in" your score.
But you can get freebees for using your Xbox.
If you are an Xbox Live Gold member on Xbox Live in certain regions you are eligible for the rewards program, read all the details here: http://rewards.xbox.com/
gaming.stackexchange.com/users/18967/Jannie Pieters
Although it used to mean nothing but how "eleet" you are, the Xbox Live Rewards system has announced that you will get increasing benefits based on your gamerscore, including discounts and free gifts, with the highest tier unlocking at 25,000 gamerscore.
There's nothing particularly exciting on offer, but signing up is free.
Beyond this, there are a few other things you can do with the Xbox gamerscore/achievement system: Getting all the achievements in a game (typically 1,000 gamerscore in a retail game, and 200 in a XBLA game, usually plus some if there's DLC)
will add that game to your "Completed" list, which tracks all of your completed games.
It's possible to select a game, look at the achievement list, and compare your score on that game to another person's.
This can give you an idea about how far they've played in a game compared to you, or whether or not you both own a particular game.
It will also allow you to join current friends who are playing the game, in a game party for that specific game.
Microsoft publishes an API for interacting with the gamercard system, which people have used to create online playercard generators, which you can use to add your gamerscore and recently played games, among other things, to a forum signature or similar.
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Gamerscore doesn't have any function other than bragging rights.
Each account keeps a running total of Gamerscore earned across all games using that account.
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While Achievements do not provide benefits for most games, you can link Ubisoft games such as Assassin's Creed: Revelations to your Ubisoft uPlay account to earn rewards for gaining certain achievements.
There are often a few achievements that provide credits that you can spend on new character appearances, missions, abilities, and other nice items.
gaming.stackexchange.com/users/6619/Joshua Shane Liberman
As Tycho points out , while you think Gamerscore and achievements are for you, they are more likely a very cunning way of tracking your gaming demographics.
Consider the fact that Microsoft makes them a requirement for all games (except Indie).
While many folks (such as myself), love to collect "cheavos" by the stack - they provide a feedback mechanism to hardware and software developers better than any survey.
From such statistics you can determine how many hours into a game a typical player plays, what the historical mix of game genres has been (FPS/RPG/Sports/etc), if more players choose the "good" options or "evil" options, among other things.
Sinister, isn't it? :)
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They are of no use.
They're just to show your friends how good you are at gaming.
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So, I have been playing Xbox 360 for a while now, and have collected quite a few points towards my Gamerscore. It seems like each player has their own points, and they are cumulative across all games. Is there anything I can actually do with them, or are they just for bragging rights?
What do the Xbox 360 achievement points (or "gamerscore") do?
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<xbox-360><achievements>
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It is mostly for bragging rights. However, the Xbox Live Rewards now means you will get increasing benefits based on your gamerscore.  The community points out that there is no meaningful usage of earned achievement points.
It is stated that the achievement points are of no use.