Thank you for your question. Two unique, built-in features the Xbox Wireless Headset possesses are auto-mute and voice isolation features. Auto-mute will strongly suppress background noises when you are not speaking, and voice isolation will help tune in to just your voice when the microphone channel is open.
Auto-mute is an adjustable chat volume threshold that determines when the audio your mic pics up should transmit to friends in your chat party. Through the Xbox Accessories App on your console (support for PC app coming at a later date), you can set your auto-mute sensitivity ranges from low (some sounds are muted) to high (most sounds are muted). By creating a volume threshold for chat audio, we give you the controls to reduce unwanted background noise from being shared with your friends and teammates.
Voice isolation is a combination of a beamformer and digital noise reduction algorithm. By combining the signal of two microphone elements with some DSP filtering applied, background noises can be suppressed, but your speech will be maintained.
Xbox Wireless Headset won't cancel out outside noise, but voice isolation will help cancel out sounds other than your voice when chatting into the microphone.