If you’re like me, you’ve been using one of those handy-dandy 512MB memory cards to store your save games, profile, and other assorted digital bits and bobs from your Xbox 360 for easy portability. That 512 limit is no longer an issue, as today Microsoft added support for flash memory up to 16GB. While Microsoft encourages you to buy their proprietary SanDisk flash sticks, you should be able to use pretty much any current USB drives that can hold more than 1GB.
You’ll need to go through a simple configuration process to get your USB drive up and running with the 360, but it sounds fairly painless. Microsoft’s FAQ cautions that not all flash drives will give optimal speed and performance, but the implication is that if you have a newer one you should be good to go. You’ll also need to keep in mind that 512MB on the drive will be reserved for system files to make everything work with the 360.
You can read all the details in the FAQ at the official Xbox site: USB Storage Device Support for Xbox 360