I had this problem when I bought a used xbox from a heavy smoker. I took it apart and saw that the laser eye was extremely gross and covered in cigarette filth. If you open your box up (which is very difficult and tedious) you will void any warranty so beware.
SOURCE: unreadable disk at start up
Microsoft Xbox have some common problem like red lights, E74 and Unreadable Disc . 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.
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SOURCE: message says "disk is unreadable",
most likely you dvd drive is goinng out. I have the same problem but mine happens also when playing of the hard drive
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