Yep, me too... 

I hope this is for extra security and space. I signed up! (mostly to get a free copy of Halo Reach since I just sold mine)

haha that what i did also just for the free shit to get lol

Your insane if you think this is nil cost, or do you live somewhere there is still slavery and you dont have to pay highly qualified people, and its not like they went "oh i think its only half an hours work to improve our technology and release a new firmware!"

Newer reports are suggesting a 1gig upgrade by reducing the size of security data, they must of had some compelling reasons to want to squeeze out another gig, or what i think is now more likely is they were working on new security anyway to try and stop the pirates and a by product of that is it takes up less space, which they are uderstanably pushing as the new feature as its good for developers and its not good to antagonise the hackers / pirates of this world.

Most likely a proprietary format readable by a standard DVD laser. New security measures to reduce piracy and possibly reduced footprint for the current on disc security measures in use.

Since the wavelength of the current laser used in DVD drives can't be reduced, the lands and pits on the disks themselves can't be reduced in size to allow for more track space on the media. Same goes for the capability to shift focus to read more than 2 layers of data encoded on a single layer.

Unless MS engineers have found a way around what is essentially a physical limitation of the hardware standards used in the current DVD drives, security is likely to be the main reason for this update.

I'm guessing combination of better security combined with a smaller footprint on the disk to free up more space to developers.  DVD has worked for MS very well this gen and giving more space to developers should keep it chugging along even better and reduce the chance of games spilling over 1 DVD.

If I was a Silver member I wouldn't bother signing up mind, going by the notes you've got no chance unless less Gold members apply than there are places, which seems unlikly.

The announcement suggests that this is primarily for anti-piracy. That meaningless "disc format which will help the firm “improve” it’s products"-phrase sounds exactly like those stupid "this new firmware "improves" blabla"-phrases Sony uses to paraphrase their anti-piracy actions. The fact that they are furthermore trying to lure "thousands of participants" by promising them Halo: Reach for free also clearly points into that direction.

I just found this:

Microsoft wird das so genannte XGD3 Disc Format ab ca. Ende April/Anfang Mai einführen. Derzeit ist das XGD2 (Xbox Game Disc 2) Format im Einsatz. Die Discimages haben immer eine feste Größe von ca. 6.8GB netto und sind auch als solches auf diese Maximalgrenze beschränkt. Das XGD3 Format bietet etwas über 1GB mehr Speicher (ebenfalls netto) und erreicht somit grob 7.8GB. Diese 1GB stehen den Entwicklern natürlich zur Verfügung. Allerdings werden dadurch auch neue Hash Checks und Anti Piracy Maßnahmen eingesetzt. Diese XGD3 Disc Images (falls man sie auf herkömmliche Weise auslesen kann), können auf keine handelsüblichen Double Layer Rohlinge gebrannt werden, da sie die Größenkapazität sprengen. Beim Pressen der Discs im Presswerk werden quasi Validierungsdaten an die äußersten Ränder der Disc gepresst, die einerseits der Verifikation dienen, andererseits auch als Anti-Kopiersystem, denn diese Bereiche sind auf Rohlingen nicht zu beschreiben, ganz zu Schweigen davon, dass Brenner diese Bereiche wohl nur unter Außnahmesituationen beschreiben können.

Sorry it's only german, here's a short translation/summary:

Microsoft is indeed doing this primarily to fight piracy. The upcoming "XBox Game Disc 3" (XGD3)-Format will of course continue to use normal Dual Layer DVDs, but in the future they will be writing data to areas of the disc that usually cannot be written to with standard DVD-burners and standard burnable DVDs, making such discs impossible or at least very hard to clone with standard PC hardware.

A positive side effect of this is that there will be about 1 Gigabyte more space on the disc to store game data in.

An extra 1GB of space is a pretty big upside, particularly for any developers that are right on the cusp of either cutting content out of a game or splitting it into two disks.

Only thing is, with DLC that content would show up otherwise but as a separate purchase. So maybe it's not necessarily a big upside for developers who do this, but then again more optional space is always better than less.

I don't think anyone's kidding themselves into thinking enhanced security measures aren't the real impetus behind the format change, but frankly, who would complain about this other than those who feel it's their right to copy their games.

A highly placed development source has confirmed to Digital Foundry that the new disc format being beta tested in a new dashboard upgrade adds 1GB to the storage of Xbox 360 game discs.

The maximum space allocated to game data on the current disc format is just 6.8GB out of a maximum of 7.95GB on a standard dual layer DVD, with over 1GB dedicated to a DVD-Video partition that also contained anti-piracy security sectors. Astonishingly, this meant that the last generation PlayStation 2 had a higher level of raw storage available to games developers than the newer Xbox 360. It seems that this video partition has either been drastically reduced or omitted completely in the new format Microsoft is looking to roll-out.

http://www.eurogamer.net/articles/digitalfoundry-1gb-360-disc-upgrade