Dean Takahashi has published a long, in depth article
that details the reasons behind the RROD problem that caused so many Xbox 360's to fail. It's a long read (6 pages) but it's worth it just to get a look inside what went on and why there are so many defects. There's some new information but the core reason of why the device failed was because Microsoft rushed it to market to beat Sony, even though they knew there were problems with the Xbox 360 when it shipped.
While it certainly makes Microsoft look bad it's worth noting that the strategy seems to have worked as Microsoft is currently leading the PS3 right now. The real question now is will people still line up to buy the next Microsoft gaming system when it comes out or will they wait until Microsoft fixes all the issues (real or perceived).