Xbox 360 FAQ
My Xbox 360 says unrecognized disc, what do I do?
Unrecognized disc = bad disc drive
With really only one exception (More on that later) the unrecognized disc error on the Xbox 360 console is always caused by the disc drive. Most of the time when an Xbox 360 disc drive goes out it won't boot up or load games. You'll insert the disc and nothing happens at all. So why are you getting the unrecognized disc error? This happens when the disc drive is functioning just enough to spin and get info off the disc, but not well enough to actually run it. So, the console sees and recognizes there is a disc there, but then hits a snag while pulling info to actually boot up the game or disc. This can commonly happen during a period when the disc drive is just starting to fail. It has a little juice still left and isn't totally dead yet, but will still encounter issues. Many times the disc drive will still be able to read normal DVD movie discs without an issue as that requires less effort from the laser. At this point you would need an Xbox 360 disc drive replacement such as one of these. Just keep in mind some disc drives require soldering to install. You have to remove the PCB (Printed circuit board) from your old drive and install it into the new one or it will not play game discs. (The drive PCB and motherboard are "married" together and can not be separated) Luckily this is extremely novice friendly soldering as there only a couple wires you have to attach to the PCB.
As I mentioned there is one exception to this as you can also get the Xbox 360 unrecognized disc error when you are using an invalid disc. A great example of this is when someone tries to play an HD DVD movie inside the console instead of inside the special external HD DVD player add on. Another good example of this happening is when you try putting a Blu-ray movie disc or another game console disc such as a PS1 game disc inside the Xbox 360. These will also populate this error as the file system will not be recorgnized, or the disc format itself is not readable by the Xbox 360.