It has been more than a year since the Xbox 360 came onto the market and during 2006 many attempts at modification were made by hackers who had already started work on the first Xbox.Currently it is possible to make a software modification (therefore without adding an expensive modchip) and run backups of our games, having also the possibility to play online (without suffering any ban from MS on their game servers) just as if we are using the original.
The method is based on changing the DVD player's firmware of the Xbox360 and involves only little work by the user, now made easy by the presence of automatic tools. The Xbox360 DVD players are Samsung and Hitachi and for both it is possible to modify the firmware, connecting them to your PC. personally tried to make this type of softmod, not having the Xbox360 but always good to know that there is the risk in the case of updates of the Dashboard (the console OS) of malfunctions.
I refer to the site and the tutorial that explains in detail how to make the change a cost 0, voiding the warranty: Tutorial
For the Xbox 360s produced from July-August 2009 onwards, which mount LiteOn DVD players, we wrote a detailed guide: Xbox 360 editing guide for LiteOn.