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Try a different disc. The reason I say this is because if you try a different disc and it's still unreadable, then you have a problem with the laser lens inside your 360 and it needs to be cleaned. This voids the warranty so you aren't going to find any advice from Microsoft on how to do this. If you Google "Cleaning the Xbox 360 Lens", you will come across a ton of articles and YouTube videos on cleaning the lens.
However, if the other disc works then the problem is with the disc itself. It may be dirty or it may be cracked. If it's dirty, take some rubbing alcohol and a soft piece of cotton material to clean the disc.
Sounds like the Xbox is trying to find a piece of data that it need to go further and because of a dirty or scratched disk, it can't find it. If you want to verify whether it's your disk or your Xbox, go to your local game rental store and rent a copy of the same game to see if you have the same problem.
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. .
I do believe its a problem with the disk. The disk may not be scratched or anything but it could possibly something internally wrong with it. I'd take the disk back and exchange it. Hope this helped! Have a great day!