What happens when your account has been hacked and what should you do about it?

(story happened just today)

Playing Cod: WaW Hardcore search and destroy.

Match just started, and can't choose a weapon, and the screen showed connection interupted.

it kept on doing this for around 2 minutes straight, when i heard a boom and defeat and the record 0-1.

then the game ended, and it took us (our team) to the lobby.

then it closed, booting everyone out of the game.

sooo, thinking i just got lag switched i go on to more H S&D.

20 mins later i get a message stating 1600(MS Point Symbol) from one of the players who were on the winning team of that match.

Is this guy trying to blackmail me 1600 points or he will hack my account?

If this happens, what should i do if my account gets hacked?

You report him to Microsoft and you let them deal with it

They'll come down hard on him for extortion

Yeah. Don't worry about it. He can't do anything. He has to have your email and password first off then you windows live email and password. Just report him and he can't do anything.