Instructions
Use your computer to copy the AVI movie file or files you want to watch on the Xbox 360 to a USB memory stick. Plug the USB stick into a free USB port on the console&'s front or rear.
Turn the Xbox 360 on and wait for the Dashboard to load. Move the analog stick to the right and select "Movies," then select "USB Device" by pressing the "A" button. A list of movie files on the USB memory stick will appear on the Dashboard. Select the movie file you want to watch on the console and press "A."
The AVI file will begin playing off of the USB stick on the Xbox 360. If you want to pause or stop the movie, press the "B" button on the controller to open the DVD controls window.