Valve is handing ban-power to the Counter-Strike: Global Offensive community so it can regulate itself. This self-police force will be known as Overwatch.
Valued members of the community will be selected to be prospective Overwatch investigators. They'll see an Overwatch button on their game menu that signifies there's a pending case to evaluate.
If they chose to participate they'll watch eight rounds' worth of replayed gameplay - around 10 minutes - and be asked to judge whether The Suspect (all names will be changed) was majorly disruptive (cheating), minorly disruptive (griefing) or if there was insufficient evidence.
If all investigators agree, a ban will be issued - duration dependent on severity of offence. But if all investigators agree there's insufficient evidence, the case will be thrown out.
Overwatch investigators will be scored and Valve will chuck in already judged cases to test investigators with.
While Overwatch is in beta, the system will issue fewer cases and the verdicts will be reviewed before coming into effect.
There's an Overwatch FAQ with more information.