Alongside a multi-user family plan, which has been confirmed as being in the works. The new and hypothetical ad supported tier for Xbox Game Pass comes from a new survey sent out to European customers/players (
via ResetEra). With EURO 3 price-point the cheaper alternative to the base Xbox Game Pass subscription would play ads before and after each gaming session.
It might also limit access to day-one first-party Xbox Game Studios titles for six months in addition to limiting access to things like Xbox Cloud Gaming.
The move to an ad-tier model isn't a surprise as Microsoft has recently invested and acquired companies like adtech platform Xandr for this sort of thing. Industry analysts have also been stating that both Microsoft and Sony will implement ads into their subscription services at some point, and with Netflix providing a similar cheaper ad-tier - it's probably just a matter of time.