While your Xbox 360 can run whether it's sideways or flat, moving the console while it's on can result in the discs getting scratched to hell. Tens of thousands of 360 owners have found this out the hard way but apparently Microsoft knew about it before the console was even released.
An unsealed document from a class-action lawsuit against Microsoft contains the following quote from Microsoft product manager Hiroo Umeno: "This is ... information that we as a team, optical disc drive team, knew about. When we first discovered the problem in September or October (2005), when we got a first report of disc movement, we knew this is what's causing the problem."
Microsoft considered three solutions to the problem: increasing the magnetic field of the disc holder (rejected because it interfered with the opening/closing mechanism), slowing the speed that the disc rotated at (rejected because it would've increased load times), or adding a small bumper (rejected for its cost). Ultimately Microsoft decided to just slap warning labels on the manual and the console. They also instituted a Xbox 360 disc replacement program where customers can exchange scratched discs (Microsoft games only) for new ones for $20 bucks a pop. According to another Microsoft employee quoted in the lawsuit, 55,000 customers have complained about scratched discs as of April 2008.
I don't know who the hell is picking up their console and rotating while they're playing a game. Suppose it's an unpleasant surprise for anyone who accidentally knocked over their 360, though.
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