It had to happen. My first problem with my 360 and its only about 2 months old....
I was happily playing Gears of war (Its alright not amazing but alright.) when all of a sudden i heard a horrible noise coming from the disc drive then a few minutes later the message "Unreadable disc" popped up and well..There it was a circular scratch on my disc. It was in a vertical position which i now believe was the problem, No, I didnt move it, jolt it or tilt it. I just think that having my 360 vertical caused the problem.
I took it to gamestation and had it cleaned. It looks better now but im still really annoyed.
In other happier news, i bought Beautiful Katamari. I loved the ps2 katamari games and cant wait to play this one.