I blogged just recently about my 360 getting the red ring of death after only a year and 1 month of operation. I purchased an extended warranty agreement with the retailer for on the spot replacement of the unit for 2 years from the date of purchase. So luckily, I now have a brand new Xbox360 to replace the dead one. The same hard drive was moved to the new unit so I don't lose anything which is good.
The concerning part of this is that the sales rep of the retailer that they are getting a huge amount of 360's returned because of this same problem, and usually a little after the warranty period has expired.
I really hope Microsoft hasn't skimped on the quality as this would eventually be a really bad thing for them, even if initially gaining marketshare. I guess I'll know more in a little over a year to see if my latest XBox replacement dies like all my others.
The moral of this story?
If you are considering purchasing an XBox 360, make sure you purchase an extended warrnty if the retailer provides that option. IT only cost m an extra $85 and was well worth it. If your retailer doesn't offer that, I'd be inclined to go to a different retailer.