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Your CD/DVD needs a file, "bios.bin" (there's a bunch of other names that will work, too, I'll post a list next time -- not that it matters). This file is a copy of the BIOS you wish to flash overtop of the flashbios. For example, you could put EvoX M8 on your disc as "bios.bin", select CD/DVD flashing from the menu, and insert that disc. You need to use the correct filesize for your modchip, for Aladdin you would use 256k. For some other mods, 512k, or 1MB. It all depends on what you own.
I suggest you use DVD to flash from. CDs of any type (even CDRW) don't work reliably in XBOXes. If you find you put the disc in and the flashbios refuses to flash, that's because it can't read your disc.
BTW: The disc must be in a standard ISO9660 format. Not UDF, XBOXFS, or any other wacky stuff.