Make:

The photo above is taken from a Wikipedia entry titled Xbox 360 Technical Problems, which describes a hardware failure issue that is not uncommon for Xbox 360 owners. The general problem is that the array of solder joints that attach the GPU and CPU to the motherboard can break overtime due to heat expansion during normal use. This is actually quite similar to an issue with many early model iBooks, and the fix is similar: you find a clever way to re-fuse the electronics back onto the motherboard.

Brian Whitfield wrote in about his own experience:

So ... all the Xbox 360 owners out there have one thing in common. We all dread to wake up and turn on our 360 only to find the 3 "Red Lights of Death" (RoL). That happened to me the other day, and I started to panic. Christmas time is soon, and I have absolutely no money to spend to fix up my 360. So I started looking for tutorials on how to fix this problem (as my Microsoft is off warrenty since I bought it off eBay).

I came across this lots of these "Towel Trick" tutorials. So I watched a couple videos on YouTube and read a bunch of blogs (I never knew so many people had soo much time on their hands), in any case, I figured I'd give it a shot. Now for those who don't know, the "Towel Trick" (TT) is where you turn on your Xbox 360 and then wrap it in a towel and leave it on for a certain amount of time (most tutorials say 10 mins, but I only left mine on for like a minute to a minute and a half). I turned off my Xbox and then unwrapped the towel and turned it on, and it worked. I played for a good 3 hours and no problems.

Today, I went to use my Xbox 360 and yet again, I received the 3 RoLs. So I did the same thing, and it worked again. Now most people will say this is stupid and overheating something only causes more damage to it. Well it might, but if the Xbox works, you can save yourself $140 (which is what is cost to send and have Microsoft repair it without warrenty). I can't believe something this simple worked. I was reading online somewhere (not saying this is entirely true, but hey, worth mentioning) that the reason for the 3 RoLs, is because of the solder between the GPU and the board. Supposedly, if you heat up the 360 enough, the solders melt a bit back into position. Again, not saying that is true, but good enough reason for me.

As long as my Xbox 360 works, I will probably continue to use the "TT", cause let's face it, everyone would rather have a more damaged Xbox 360 that works, then a minor damaged one that doesn't.

If the towel trick works for you, awesome. For most people, though, it sounds like it's a very temporary fix. To get the job done right, you need to liquify those solder joints and allow them to make a more solid connection.

In the case of the similar iBook issue, Mark Hoekstra from GeekTechnique was using a can of sterno atop the GPU to heat things up. That route, while demanding some sincere applause, freaks me out too much.

YouTube user twitch88 has a video showing how to use a heat gun to get the same effect. It requires a little extra equipment, but the process is a bit more controllable that an open flame. To each his own, though (and send me a pic if you are brave enough to try the sterno trick and it works).

References:
Towel Trick Info @Engadget - Link
Fix the Xbox 360 With a Heat Gun (video) - Link
Xbox 360 Technical Problems - Link
Fix an old iBook's video problems... with fire! - Link