Serrels over at Kotaku is reporting that Microsoft customer support has begun informing some Xbox 360 owners that the DVD drive in their console may not play retail discs after the upcoming update to Xbox Live. The good news is that they're supposedly replacing the units at fault.
The letter sighted by Serrels indicates that Microsoft were able to detect the issue over Xbox Live, and are pre-empting issues by offering affected customers a new replacement 360 unit and a 12 month subscription to Xbox Live.
As Serrels indicates, the issue is most likely to do with Microsoft adding support for new high capacity discs:
The email was most likely referring to the Xbox LIVE update which is being phased in between May 19 and May 30 – an update which reflashes the DVD drives to a new stock firmware, and adds support for new XGD3 disk format. It’s this update that allows an extra GB of usable storage on game discs.
That would most likely mean that the games Avery’s Xbox 360 wouldn’t be able to read haven’t even been released yet – explaining why his 360 could still read currently available game discs.
Microsoft are still yet to comment on the issue, but they have confirmed it via the company's Xbox Support Twitter account.