This is called Red Ring of Death or RROD by the community, it means that the CPU or GPU or both have a bad solder joint, that is caused from rapid heating and cooling from poor cooling design of the xbox 360. To fix it follow these instructions.
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Stop once you've removed the DVD drive. Remove the fans from backside, and set them on the heat-sink on the right, and make sure they are pointing where the air is going up.
Put a piece of of cardboard or plastic something non conductive in between the heat-sinks to prevent airflow from the fans.
Turn on the 360, and leave it till it goes from 3 rings to 2 rings, wait 3 minutes, then switch the fan over to the other side.
Wait about as long as you did for the other one then turn off the 360.
Wait 1 hour for the 360 to cool off.
DO NOT move the 360 while it is cooling down during this period or you will permanently ruin it, the solder is being re-flowed.
After an hour, put the fans back, and turn the 360 on, it should work. Once its working,
I recommend doing a 12 volt mod on the fans to prevent RROD from happening again, and changing out the thermal paste with arctic silver 5.