UPDATE 5/18/11 1:00 PM PST: Microsoft's Major Nelson has confirmed that the firmware update that is causing disc read errors is in fact not related to the May 19 mandatory firmware update, but a previous update. Therefore, if you haven't been affected by the error yet, chances are you won't be as the new format has been through "rigorous tests" and MS has seen no known compatibility issues.
Microsoft has announced that the new mandatory Xbox 360 firmware update releasing May 19 to integrate the use of a new disc format will brick some 360 models. The company issued a statement saying that some users will experience disc errors when upgrading their firmware and the error will read "disc unreadable" or "disc unsupported" after completing the update.
"Following a recent update to our system software, we have become aware of an issue that is preventing a very small number of Xbox 360 owners from playing retail game discs," Microsoft said. While the error will be automatically logged, the company is "proactively reaching out to customers that may be impacted to replace their console." For anyone having problems Microsoft urges you to get in touch with Microsoft support so they can verify your console has been impacted and help fix it as soon as possible.
Microsoft is planning to replace an unspecified number of Xbox 360 units with new 250GB Xbox 360 S consoles, according to EuroGamer.
The new firmware is to prepare the Xbox 360 for use with the new XGD3 disc standard, which adds 1GB of useable data to 360 DVDs and also will add Paypal support.