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If theirs two lights means its overheating and you need to cool it down if its 4 its many things and if the disc drive doesn't read anything and by the sound of it its been played a lot its probably the disc drive could have gotten shot so first of does the disc driver even spin the disc if so then is the laser that probably went to hell and then you'll probably have to replace the disc drive if you do make sure its the same brand as your current one for example if its a hitachi then make sure you replace it with a hitachi disc drive.
this is a problem the microsoft has been working on ... remove any disc from the tray> unplug it from all power the plug it back in> open the disc tray .. leave it open for a little while like 10-15 seconds .. then put the game in and it should work .. if it does not however you have one of the defected disc trays and you'll need to get it repaired by microsoft .. i know its not what you want to hear but hey at least they will fix it free of charge =]
Though i fixed the Disc Read Error myself within anhour but please test the below method at your OWN Risk. Please alsonote that microsoft is no longer providing Extended warranty for E74Error.
Check out this DIY Video Guide,that explains step by step instructions to fix Disc Read Error yourselfwithin an hour. It also provides the money back guarantee in case youare not satisfied. As i fixed my Xbox myself so i thought to share itwith you guys.......