History
In April 2010, Microsoft updated the firmware of the Xbox 360 console to accept the use of flash drives. Before the update, only Xbox 360-developed hard drives and memory cards were compatible with the console.
Function
The flash drive is inserted into the USB port near the bottom front of the console. Game saves, user data, and full games downloaded from the Xbox LIVE Arcade can be saved directly to the drive.
Limitations
The drive must be formatted with the FAT32 file system. An Xbox 360 will only read between 1GB and 16GB of free space on any flash drive, regardless of the size of the drive itself. This means that if you insert a 32GB flash drive into the console, only 16GB can be used to store data. Furthermore, Microsoft only guarantees that an Xbox 360-branded flash drive will function: other drives may or may not work.