In a statement to Engadget Microsoft said:
Once the required data -– a fraction of the entire game -– is on [a consumer's] hard drive, they can jump into the action while the rest of the game finishes downloading in the background.
It means that both disc and digital games now support this “play as you download” feature, with it already being confirmed by Microsoft that while a game is being installed to the hard-drive from a disc, you can start playing it.
What will really be interesting is how much data is actually required before you can start playing. Obviously it’s going to vary (potentially very widely) game to game, but will it average out at 10% of a game’s total data, 50% or more? We’ll have to wait and see this feature in action before making judgement.