It's not illegal if yer not using it to steal games but if Microsoft finds out you modded Yer 360 they will permanently ban you from XBox Live. And they will find out rather quickly. When you sign onto XBox Live the system like WoW does a check on your console that looks for things that threaten their server(viruses, hacks, cheat software and of course mods) so if yer system is carrying any of those or modded in anyway it will be booted from the system until you start all over from scratch.