Instructions
Turn on your Xbox 360.
Open the "My Xbox" menu option. Select the "System Settings" sub-menu.
Open "Network Settings." If you are on a wireless connection, select the name of your wireless network from this window. If you are on a wired connection, select "Wired Connection."
Select the option reading "Test Xbox LIVE Connection." A new window will appear on screen asking you to update your console's firmware. Select "Yes" to have the update automatically downloaded and installed onto your console.
Plug your iPhone into your Xbox 360 using the Apple USB cable. Plug it into the console the same way you would connect the iPhone to your computer. Thanks to the firmware update your Xbox 360 will now recognize the iPhone.