Officially, Microsoft has not yet shut down Lionhead Studios, but they have canceled Fable Legends. They “are in discussions with employees about the proposed closure of Lionhead Studios in the UK.” Press Play, another developer at Microsoft Studios in Europe, will be shut down as a result of this same announcement, but that studio only developed Xbox One titles, and so I'll defer to other gaming outlets to cover that part of the story.
It's always unfortunate when jobs are cut, which seem certain given the closing paragraph of the Xbox announcement thanking them for their service. The weird part about this whole issue is how late plug was pulled in its development cycle. A closed beta has been operating for months, and a demo was shared with press as a DirectX 12 benchmark. The business model was supposed to be free-to-play, which means that it could potentially continue to bleed money after launch, but you would expect that concerns would have boiled over much earlier than now.
For our audience, this also means the cancellation of one of the expected, early implementations of DirectX 12. Lionhead Studios have also contributed to Unreal Engine 4 during the development of Fable Legends, particularly with shadow map optimization. I think their Global Illumination features, the main topic of the same article that was linked in this paragraph, were contributed upstream too, but I can't find an explicit source of that.