Xlive.dll is a system file necessary for some games to work in a Windows environment. This file is part of the Games for Windows - Live program, which is necessary for connecting games with the online gaming service from Microsoft. Accordingly, if this file is not in the system, and it is necessary for some game (without it the game is not started), the most correct solution is to reinstall or install this program.
You can download the program from the download page. During the installation of Games for Windows - Live, the file should be restored. Usually, you do not need to uninstall the program beforehand to restore or update the program files. However, if the file has not been restored, you can try to uninstall the program with Revo Uninstaller and then install it "from scratch".
The main benefit of using Xlive.dll is that it enables certain games to connect with Microsoft's online gaming service, enhancing the gaming experience.
Xlive.dll is located in the folder c:\Windows\System32\ and you can try to restore it manually. Download the file archive. There will also be a file with detailed installation instructions (you may need to copy the file to several folders and register it).
For reference: The DLL library has the same structure as the program, but never runs autonomously. The program code from the DLL file is always called by a third-party program. Thus, different programs can access the same DLL file and use the functions it contains. In this case, the program developer does not have to equip his program with the codes available in standard libraries and you can make the program file more compact.