Background/History
The Xbox 360 is the successor to the famous Xbox created by Microsoft in 2001. The Xbox 360 was released in 2005, 4 short years later. The console was so heavily anticipated that upon release (November 22, 2005 in the U.S.), it sold out everywhere (except Japan).
Models
When the console was first released, there were two models - the Xbox 360 Core ($299) and the Xbox 360 ($399). The Xbox 360 (not core) came with a Media Remote as an added bonus. Today, the Core has been replaced with the Xbox 360 Arcade edition, and there other option is the Xbox 360 Elite. All the models came in a variety of different hard drive sizes, and that and the number of controllers included with each type was really the only separating difference between them. The biggest hard drive to date is 250 GB and the smallest is 20 GB (no longer available).
Hardware
The Xbox 360 in essence is a computer. It comes complete with a CPU, GPU, RAM, and Internet connectivity.
CPU
The central processing unit (CPU), was given the name Xenon by Microsoft. It was designed by IBM, and features a 64 bit triple core PowerPC based design. The CPU is clocked at 3.2 GHz.
GPU
The graphics processing unit (GPU) for the 360 was created by ATI. Dubbed the Xenos, it had a clock speed of 500 MHz and is capable of handling 4x anti-aliasing without suffering any resource loss. These had a problem overheating in earlier models, causing the infamous "Red Ring of Death", and Microsoft responded by adding a new aluminum heatsink on later models in effort to fix the problem.
RAM
The console came equipped with 512 MB of GDDR3 onboard RAM. This memory is shared between the GPU and the CPU.
Sound
The 360 is able to support 5.1 Digital Surround Sound. Another important thing to note is the voice communication is dealt with by the console, not the code.
Wireless
The 360 comes with the ability to be able to connect to the Xbox Live Network simply by creating an account and giving the 360 a network connection on your home network. The controllers also connect wirelessly, but charge on a USB cable.
Software
The original GUI features a tabbed interface that could be accessed whether or not there was a disc in the system by either simply turning it on or pressing the X in the center of the controller. Microsoft released several updates to the UI, the newest being what is referred to as NXE (New Xbox Experience). The aim of this update was to make navigating through the console easier. This also came out with a very important side addition, the ability to save games to your hard drive, which led to many people modding their console in order to download free full games from the marketplace.
The console can also play HD DVD's, which were on the rise at the time. They have however since then significantly reduced in popularity.
Live
There are two types of Xbox Live memberships - Silver and Gold. Silver is available without a subscription and allows you to access the marketplace, create a gamercard, and talk to friends. The original Xbox Live membership was renamed to Gold. Xbox live is extremely successful and has developed an expansive community with over 20 million people paying 50$/year to keep their subscription active.
Probably the second most important part of Live (next to online competitive play) is the digital distribution of games that was added in the marketplace. Services offered here include game demos, trailers, themes, and newer features include things like movie streaming through Netflix. There is an area where you can download games, but they aren't full Xbox 360 new release titles. These include community made games, and other older arcade games. This portion of the store was named Xbox Live Arcade.