Responding to news that some Xbox 360s might not be able to play game discs, Microsoft’s PR firm sent us a message to clarify the issue:
Following a recent update to our system software, we have become aware of an issue that is preventing a very small number of Xbox 360 owners from playing retail game discs. This issue manifests itself as a unique “disc unreadable” or “disc unsupported” error on the screen and is unrelated to our recent public beta. We are also able to detect this issue over Xbox LIVE and are proactively reaching out to customers that may be impacted to replace their console. Any Xbox 360 owners receiving this error are encouraged to contact us at www.xbox.com/support/contact so we can verify if the console has been impacted.
This disc read error message is tied to a change in the disc reading algorithms in a recent software update and is not specific to older or newer versions of Xbox 360.
If your Xbox 360 has trouble reading discs, let us know how the replacement process works out.