The Xbox 360 has always had its share of hardware problems. One of which was that the system runs louder and has longer load times than the competing Playstation 3 and Nintendo Wii. With Microsofts new firmware they plan on ending that with the ability to install, much like most Playstation 3 games.
How does this benefit players? When running a game off the hard drive the system doesn't have to work as hard and there's no need to run the laser to read the disc, which means the system runs nearly silent, according to early play tests. However, games will also need to take up a lot more space on the hard drive (Fable 2 takes up more than 6GB) which may account for Microsoft upping the standard hard drive on the Pro model 360 to 60 GB (from 20). Needless to say, to take full advantage of the new feature players may want to invest in the Elite model 360 with it's 120GB Hard drive.
Just like the Playstation 3, even after installing a game on the 360 players will still need the game disc to run the game.
Since the system will be less strained and run cooler when playing an installed game, it's very likely that installing games could solve the 360 overheating (red ring of death) problem. The problem was ramped in 2005 when the 360 launched, and has since been stabilized with the new "falcon chipset" that allows the system to run cooler. Now with the game installs it may be possible to completely remove all risk.
However, unlike the Playstation 3, players will not be forced to install games to play them. If you want to save space on the hard drive or if you play on an arcade model and don't want to invest the extra money into an Xbox hard drive you can continue to play the old way.
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