To encourage development, Robertson has extended the prize offer into 2003, which is certainly generous. However, I have to doubt Robertson's claims that there are no business motivations behind his offer.
The whole idea behind Lindows is to bring Linux to the masses. What better way to do that than with a version of Lindows that runs on Microsoft's Xbox? If the Xbox Linux project does succeed, all Robertson has to do is dole out the prize money and he's essentially got the building blocks for an Xbox version of Lindows. If the Xbox Linux project doesn't succeed, Robertson doesn't lose a dime, which makes me wonder if offering prize money for Linux development projects isn't an ingenious way to conduct risky R&D projects.
Don't get me wrong. I don't think that Robertson is necessarily trying to exploit the Linux community solely for his own personal gain. After all, a completed Xbox Linux project would still be available under the GPL and benefit the Linux community as a whole. However, I do have to wonder if this kind of thing will catch on, and if it will really be beneficial to the Linux movement in the long run.