This microsoft "insider" stated in this article that the 360 is actually designed to be vertical. Now it obviously operates in either position.
But... from a reliability standpoint, when set up vertically, 2 of the 3 sides exposed to the air are the largest sides, giving the unit more of an ability to cool itself instead of being horizontal where one large side is only millimeters from whatever surface it is on, trapping heat beneath the unit.
And for those who say, standing it vertically blocks the largest vents and is harmful to airflow, again, this "insider" states the end on which the 360 standsis designed for air intake. Well, air only needs about an opening as thick as a sheet of paper to be drawn in, air is pretty thin.
Just my (well not actually mine) 2 cents on those on the fence about positioning of their unit. For the record, I have mine around my neck on a big chain like Flavor Flav.
=)
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