I don't think it limits you to anything.... I really think its useless.
It dictates the kind of people you're usually around on XBox Live. If you're on underground, then trash talk and vulgarity are pretty much completely allowed, vs. on family where those things get a lot of negative feedback, possibly bannings.
Upon review of the first post of this thread, freak is officially the biggest loser. Evar. Enjoy your 10,000 points.