I'm not sure, actually. Unless I missed it, I don't remember anyone officially saying the camera is "always on", and nothing that says that the camera needs to be on at the same time as the microphone, which is waiting for the voice command.
Process could be:
You: "Xbox on."
[microphone detects command, camera turns on and recognizes user]
That said, it
has been confirmed that the Kinect can be turned off completely.