Microsoft will be adding some USB functionality to the Xbox 360 with a system update that will be released starting April 6. The update will allow USB flash drives to be used for storing profiles, game saves, demos, and more.
Once the system update is downloaded, you can connect a USB flash drive and configure it for use. Once you’ve gone over to the memory section and configured the device, your system will conduct a one-time performance and integrity check to make sure the drive is working properly. You can then configure how much of the drive you want to use for storage, but the max on the Xbox will be 16GB. If you drive is larger than that, you will still be able to access the remaining space on your PC. You can have up to two devices connected at one time, so technically you can have up to 32GB of storage using USB flash drives.
Memory management functions have also been improved, so there will be more control on what is copied or moved between storage devices.
Microsoft is stating that any flash drive can be used, but they are partnering with SanDisk to release an Xbox 360 branded USB flash drive in May. It will come pre-configured, so you can take it out of the box and go!
If you would like more info or pictures of the update, check out Major Nelson.

