Things You'll Need
Instructions
Turn on your computer and log in to your user account. Insert your USB device and located the .AVI file(s) you want to watch on the Xbox 360. Right-click the .AVI file(s) and select "Copy." Then go to "My Computer" and double-click the USB device. Right-click anywhere in the USB device's window and click "Paste." The .AVI file(s) you copied will be sent to the USB device.
Connect your Xbox 360 to an Ethernet Internet connection. Turn on the console and wait for the main menu or "Dashboard" to load. Sign in to your Gamer Profile and select "Connect to Xbox Live" with the "A" button on the controller. Your console will connect to the Xbox Live servers and download the newest Dashboard update(s). Updating your console will allow it to play .AVI files from USB devices.
Wait for the Xbox Live update to finish; then turn off the console. Insert your USB device into a free USB port on the front or rear of the console. Then turn on the Xbox 360. Move the analog stick to the right and select "Movies" with the "A" button. Select "USB Device" and press the "A" button. Select the .AVI file you want to watch and press "A" again. The .AVI movie you copied to the USB stick will begin playing on your Xbox 360.