Valve acknowledged that it was an error on their part. Valve hadn't made a comment about the situation for the first week and a half of complaints, but 3 days ago they displayed a heartfelt apology to the gamers.
The only way to play online again after receiving such a ban would be to buy the game again, something these gamers were not even considering as they were adamant of their innocence. However, after July 19 improbably massive groups of gamers went and displayed their outrage over seemingly random bans they were given after playing Modern Warfare 2 and receiving a ban. Now, I know what you're thinking, everybody claims to be innocent, especially if they're guilty. That is, until a massive wave of gamers received bans and all claim they're completely innocent.
Therefore, virtually nobody on a VAC server tries cheating, and the whole system works well. On VAC-guarded servers players are protected from people who are using hacks and exploits, as they will be detected and automatically handed a ban. On the PC, Call of Duty is distributed by Steam and many hosted servers are guarded by the VAC (Valve Anti-Cheat System). There's no denying that the online scene in Modern Warfare 2 is pretty much where it's at: everyone loves it, everyone plays it, and everyone is addicted to it.