Disc error

Microsoft Xbox have some common problem like red lights, E74 and Disc Read Error. Microsoft is providing extended warranty for red lights problem, Means you will have to spend some money in order to get this problem repaired from Microsoft also you will have to wait for 3-4 weeks to get your Xbox back. There are many reasons disc read error can occur in your Xbox like your disc might not be clean, laser might also be dirty and many more common problem. I would suggest you to first clean out the disc, you are using. If that don't solve the problem you can also take the help of DIY guide available at Internet. I think you have got good no. of options to get your Xbox repaired, Choice is yours.

You need a new hard drive or reformat the one you have with a laptop or PC.
Controll Panel > Administrative Tools > Computer Management > Disk Management (on left)

Hook up the hard drive with an external USB case ($5 on eBay). Right click on left side and initialize.
When that is finished, right click in the middle of that hard disk (where it says --GB unallocated) and click on format. You need to for mat with NTFS first then follow the steps again to format it in FAT. When thats done, re-install the hard drive into the case and reattach to the Xbox and it should be good to go!! Good luck and happy gaming!!!