Much easier said then done, William. If it's strangers, then yes, I believe it's best to try and ignore it as long as you can. Or simply leave that lobby for a more kind one. However, if you are among friends, then it's best to kindly speak up against it in hopes of preventing the disrespect from growing.

A lot of use are not shy at all when it comes to yelling at each other about stupid pointless stuff that happens in a game. Why remain quite about important matters? If you're among strangers, then pick your battles. For they will not care if they offend or not. And it may escalate matters. But friends are a LOT more respectful to one another. Speak up. If the offended happens to be the party leader, don't flat out boot them. Send them a friendly warning via Xbox's message service. Booting them without them knowing why just might make things worse.

The word of the day, kids, is R-E-S-P-E-C-T.
Use it and pass it along. ;)