Microsoft is working on a new disc format that it hopes will allow them to release bigger games. Current Xbox 360 discs are 7.95GB, of which 6.8GB is useable. This "new" disc format is the same one the company is using now except that it will - in theory - be able to use that additional 1GB of space, which is - in its current form - a locked-off partition. The 1GB was apparently allotted for DVD-video and ant-piracy measures.
The news about this new format was uncovered by Xbox 360 scene hacker commodore4ever, who recently tweeted about it: "MS will introduce xgd3 – this will add more ap checks, cvi (content integrity) checks, increase the disc size and adds a new layer for protection issues – all in the 20500 sdk! bring it on".
Microsoft is reportedly beta testing the new format using new disc-based copies of Halo: Reach. If the format has no trouble working on Xbox 360's, a dashboard update will be issued to enable it on a worldwide basis.
When I first heard about this story I was hoping that Microsoft had finally given in and would announce support for the Blu-ray format. No dice on that front.
Source: Pocket Lint