I have been reading of several cases where the 360 will show a generic screen saying to put the game in an Xbox 360. By this point you're saying "what the fuck? This IS an Xbox 360!"
On a related note, some have had issues with the 360 scratching disks.
Backgound:
-The "put in a 360" screen is simply a short DVD video. If you put the disk in any dvd player you will get the same screen. Like any normal DVD, the disk is read from the inside out.
-Xbox 360 games, like the original Xbox games, are read from the outside of the disk inward. Besides making it more difficult to rip, there is less load on the DVD drive because the disk does not have to spin as fast, and the laser has to seek less often.
Now, this difference in how the disks are read is very important.
When a disk is inserted into the 360, it first checks to see if it is an Xbox or Xbox 360 game (looks on the OUTSIDE of the disk for default.xbe, or default.xex). If it does not find this, it proceeds to look towards the inside of the disk for these same files (since the emulation profiles can be burned to a normal cd-r).
Now if this check fails, the 360 assumes the disk is an audio, video, or picture cd. The 360 will then see the video files on the disk, and play them (cause it doesn't know any better), and then you get the ridiculous, contradictory error.
Moral of the story: check the outside of the disk for any scratches, dirt, etc