Is a 1Gbps ISP download speed really even useable in today’s world? Isn’t the limit the speed of the server you are accessing, not your ISP package speed? For example, I have 600Mbps down and I never see more than 220Mbps downloading updates on my Xbox Series X. That’s because I’m at the limit of Microsoft’s servers, right? So what is the purpose of a 1Gbps or faster ISP package? I see ISPs continue to creep package speeds up higher and higher -- 800mbps > 1,000mbps > 1,500mbps -- but what does it actually mean in real world usability? Can you actually use those download speeds day-to-day?
You're pretty much correct that you're at the mercy of the server at the other end. If, as per your example, Microsoft is only pushing 220Mbps, then that's what you'll get even if your ISP offers faster. However, if you have faster service from your ISP, you can get your 220Mbps from Microsoft while someone else in your home gets, say, 250Mbps from another server while someone else gets 300Mbps, for example, from their connection.
So one device may not use the full capacity that your ISP provides, but if you have multiple devices connecting to multiple things, then you'll enjoy the faster ISP speeds since it'll all fit through your pipe without slowing down all your different connections.
In my case, I pay for 1.2Gbit service from my ISP. With that, I can get a constant 250Mbps connection through my workplace VPN when I work from home (speed limited at their end), while my personal computer can get full speeds to whatever it's connected to, and my wife can do whatever it is she needs to do, without slowing down any of our connections. Yes, some things on wifi are of course limited to the maximum speed of the wifi network, but a lot of my equipment is hardwired wherever possible (AppleTVs, desktops, my Peloton machines, some of the smart home gear, printer, etc.) to prevent saturating the wifi network.
Additionally, my work-from-home computer and it's Cisco hardware VPN has it's own ethernet connection to my ISP's modem while the rest of my home's 1 gigabit ethernet network has a separate connection to the ISP's modem, so I don't occupy 1/4 of my home's network capacity with my work VPN traffic.