Sounds like the infamous Xbox 360 "3 flashing red LED's" issue, ours did the same shortly before suffering 3 flashing red LED's.
If you have one of the original Xbox 360's (without an HDMI port on the back) every single one was built with the wrong solder, so when it gets hot enough the solder melts and your graphics chip gets disconnected.
Is mad as it sounds, run the Xbox 360 for a bit longer until it dies completely because Microsoft have extended the warranty for that specific issue to 3 years! Once you have 3 flashing red LED's you can call the help-line in your country, go through a few diagnostics with them and then (and only then!) the call agent will tell you that as long as your Xbox is less than 3 years old it will be repaired for free.
Microsoft have not widely advertised this and indeed if you try to book service on line it will tell you that you have to pay, even if you click yes to the question "Does your Xbox 360 have 3 flashing red lights on the front?".
However, if you have a newer Xbox 360 message back and we'll go through further diagnostics.
Nick. :)
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