Instructions
Turn on your Xbox 360 (and a controller), navigate to the "My Xbox" menu, and then select "System Settings."
Click on "Memory." Select the storage device (hard drive or memory unit) from the list that you want to format, and then select "Device Options" by pressing the "Y" button on your controller.
Choose "Format" from the list of device options, and then select "Yes" to confirm the operation. If prompted to enter your console's serial number, locate it on the back of the unit (or on the bottom-front underneath the USB port cover) and then enter it in the proper field. Press "Done" to begin the resetting process.