The AACS (Advanced Access Content System) is the standard of decrypting HD content of HD DVDs and Blu-ray Discs. The implementation of AACS into both HD disc formats is the target of hackers throughout the whole world and it seems the HD DVD is not that secure as it's inventors wanted it to be. Its encryption got hacked utilizing a flawed mechanism inside a special WinDVD version by members of the well known Doom9 Forums some time ago. When the company behind AACS, the AACS LA, reacted and prohibited the playback of HD DVDs using the aforementioned WinDVD version, the hackers found another way to get to the important data.
This time a hacker called 'xt5' took advantage of a common unmodified Xbox 360 HD DVD drive (Toshiba SD-S802A). He was somehow able to get a so called Volume ID out of the disc using this drive. With this Volume ID one could get access to all the neccessary keys needed to play a HD DVD movie. You won't need a software like WinDVD anymore. In order to fix this problem the AACS LA could add all external Xbox 360 HD DVD drives to their black list (Revocation List), no owner of such a drive would be able to play back a HD movie with it - except hackers of with above stated knowledge of course. Another solution would be to release a new firmware update for the Xbox HD DVDs but it would be only a matter of time until the next clever chap finds a solution for that.