Purchase a Points Card
Microsoft Points cards are widely available at stores that sell video games. These include game-specific stores like GameStop, as well as larger retailers like Target and Wal-Mart. Cards are available in either 1600 or 4000 point denominations. Each point is worth 1.25 cents, so these cards will cost either $20 or $50.
Add Points to Console
Start up your Xbox 360 and press the "Guide" button. Then go all the way to the left side of the guide to the "Marketplace" tab. Use the joystick to scroll all the way down until you see the "Redeem code" option. Select this option with the "A" button. You will now be able to input the code on the back of you Microsoft points card. When the code has been entered successfully, all the points will be credited to your account.
Add Points to Online Account
If you don't want to add the points directly through your Xbox, you can also add them through an online account. Go to the official Xbox website (Xbox.com) and then log in at the top with the e-mail and password linked with your Xbox Live gamertag. Once logged in, go to "My Account" and then select "Redeem Code" from the menu. A new page will pop up where you can enter the code from the card. Once entered, the points will be immediately credited to your account and you can make purchases either online or on the Xbox 360 console.