Microsoft learned from the PlayStation 2's ease of piracy. The original Xbox BIOS uses a layered security system:

If your Xbox is stock (unmodded), you can still identify the BIOS version by checking the serial number and manufacturing date on the bottom sticker:

The BIOS performs the following sequence:

A modchip is a physical PCB you solder to the LPC port on the motherboard. When the console powers on, the modchip overrides the official BIOS. It feeds a (often called a "cromwell" or "evox" BIOS) to the CPU.