It happend, the 'red circle of death' and my X-box 360 is toast. It happened to two of my friends and me. All of us have had our X-Box less than a year and they all died so that is a 100% failure rating within 10 months of purchase. What does that say about Microsoft's quality? I used the crap out of my PS2 for 7 years before it gave up. I got 10 months out of my X-box 360.
I called Microsoft and they were very nice about it. They are paying shipping and there will be no cost to me. I was lucky because it happend within the first year. If it had been out of that time period, I would have been SOL and out of pocket.
It is such a great system, too bad the manufacturing quality is so bad.