A recently unsealed document from a lawsuit against Microsoft has revealed that the company's own engineers knew the Xbox 360 could damage discs if moved or reoriented while in use - go figure. While many of us would consider it common sense, it appears that Microsoft has received around 55,000 complaints from people who ended up with scratched discs for doing just that.
In all fairness, though, it has been reported that the system is not as well suited to a vertical configuration as Microsoft would have you believe, even if the system is treated in a careful manner.
The plaintiff in the case argues that Microsoft knew the uniquely-high speed of the Xbox 360 drive - 7,500 RPM compared to 4,000 and 3,500 RPM for the PlayStation 3 and Wii, respectively - could lead to these problems. There are also allegations that the company considered and rejected three possible solutions to this issue before the console was released in 2005, which included increasing the disc holder's magnetic field, reducing disc rotation speed or adding bumpers to the disc drive.
The company opted to implement none of these measures for various reasons, with the last one being ruled out as too costly, so instead a warning was added to the product manual and the disc drive itself. Speaking from my own experience, I haven't had a single issue with scratched discs in more than 2 years since buying a 360, though I would certainly never think of moving the console while a disc is spinning inside. As for the infamous "Red Ring of Death," it's been a whole different story for me, having replaced my Xbox 360 two times already.