The Free60 Project has a pretty good idea of what’s in store for Xbox hackers this time (though of course none of this is officially verified):
The flash is encrypted with a per-box key
The key is stored inside the CPU
The boot ROM is stored inside the CPU
Also inside the CPU is a hypervisor that verifies the running state of the kernel, making sure there is no modification (RAM checksums), else the Xbox 360 panics and blows up!
The CPU contains RAM inside of it to store the checksums
All interrupt/exception handling is done by the hypervisor
All code runs in kernel mode
The emulator for first generation games can be updated via an official Microsoft download burned to CD by the user, though the CDs’ content will be encrypted and signed with public key cryptography. The boot ROM is stored inside the CPU.
Don’t worry if you don’t know what any of that biz means — but if you do, you probably know that this is a real world best-case-scenario trusted computing environment. In other words, would-be Xbox 360 hackers have definitely got their work cut out for ‘em.
Good luck with that.