Microsoft Corporation Informative - Beware of used Xbox 360s
On November 11th 2009 Microsoft booted over a million players (xbox 360 machines) from its Xbox Live gaming service because the units in question were identified as being modified.
November 12th Ebay and Craigslist is flooded with Xbox 360 listings. Coincidence? You decide.
Microsoft has stated that the booted Xbox 360 machines will never be allowed back on to the Xbox Live gaming service. Those machines will no longer be allowed to download updates, participate in online gaming or anyway connect to MS online services. This in effect severely cripples those machines. You'll still be able to play games offline but that's about it.
BEWARE of any used Xbox 360 offered for sale. Ideally you'd like to test it first to see if it can connect to MS but if that is not possible then if it was me I'd automatically assume it was a 'banned' machine and value it accordingly.