What is that space being used for? You were not ripped off. It looks as though that space was set aside for the Xbox 360 operationg system and patches, as well as expansions on the emulator system that runs the Xbox 360’s backwards compatibility.
The space is also used to contain preloaded content as well as a music database so you don’t need to manually enter all the music information when you rip a disc.
Many people think that 7 Gigs is a bit large for all of this, but I think it makes perfect sense as you would want to reserve a bit more than is needed for safety sake, and 13 Gigs should be more than enough for 90% of the people out there. I know I am not one of those people that would be happy with only thirteen gigabytes, as I have used up hundreds on my personal computer storing everything I do. I rarely even delete e-mails, so I doubt I would ever delete a demo, or music track from my hard drive.
Microsoft is going to make so much money catering to my hard drive needs later on in their production lifespan.