From speaking with people in the know I've been told it happens becuase it overheats in short. I'm on my third xbox now. The glue used to hold a couple of the chips down melts under the extreme heat, they are held in place by "x-clamps" which are s**t and are meant to hold the chips tight in place agianst their heatsinks but they shake over time and the chips become loose, this then causes the fault as the xbox recognises an error in reading the chips.
I took mine apart trying to mend it myself as it was out of warranty, ballache job and to no avail! Hopefully Santa will bring me one this year as I've been good!