Promotions are basically given out if you're active on Xbox Live, the forums, follow the honor code, and show leadership in your clan by helping out other members or taking action when necessary. Demotions are handed out if you do the opposite.
Gameplay doesn't effect promotions or demotions unless, of course, you are caught cheating. In that case, you would be banned. If you feel you are good at a game, however, you can choose to try-out for the Xiled Gaming Elites (XGE).