Boingboing has picked up on a point slightly buried in Gamespot's hands-on Xbox 360 report. Apparently the only way to get music files onto the console's hard drive is by ripping from a CD - while mp3's can be played directly from a connected USB device or data CD, a DRM system is in place that prevents users from copying them to the hard drive:
Get used to ripping tracks from audio CDs because that's the only way we could get music onto the 360's HDD. The console could recognize and play MP3 songs from USB devices like memory sticks and portable media players, but we couldn't transfer songs over to the HDD. Similarly, the system could play songs from a data CD that contained MP3s, but we couldn't transfer the music directly to the system's HDD. The 360 can stream music from USB devices and data CDs, but it won't let you copy any songs from those sources.
Gamespot: Xbox 360 Hands-On Report - via boingboing
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