First off I'll explain why you would want to mod an Xbox, or any other game console. Though there are many particular reasons for doing it they all boil down to wanting to make your Xbox (or game console) do whatever you want it to do that it couldn't do without being modified. For example, you might want to be able to browse the web on your Xbox, or play an older console emulator such as Super Nintendo.
There are two methods of modding an Xbox: 1)Soft modding & 2)Hard modding. Soft modding only changes software on the xbox whereas hard modding is taking the Xbox apart and modifying or adding to the hardware inside the console, such as adding a chip that allows you to play bootleg versions of games, or dvd's.
The modding that I've had experience with and by far the easiest for the inexperienced is soft modding. This method is much less expensive as modding and, with a little bit of computer background experience, is relatively easy to understand. I learned how to do everything and got all the software (or links to the software) from Se7enSins.com, which is a great site but not the only one for information on modding.
And now down to business, how I went about modding my Xbox and then Halo 2.
I first started off reading a lot about the subject on the forums at Se7enSins, such as tutorials and other people experiences and problems with doing it. After learning a lot about modding I then set out to do it!
Before modding could start I had to have the right "tools". First i needed a copy of 1 of 3 games the first of the splinter cell series (for Xbox, of course), 007 Agent Under Fire (Xbox), or Mech Assault (also for the Xbox) both of these games allowed the designers of the hacking software to install that software onto the Xbox through save game files for those games. Second I needed a device called an Action Replay Max, which is just something that allows you to store your saved game files from your Xbox to your computer. The action replay allowed me to take the modding software (stored in a save game file for one of the two games) and transfer it from my computer to my xbox. Finally i needed all the software for hacking and ftp'ing to my Xbox (ftp just allows you to transfer files from one computer to another, in this case the other is the Xbox)
The only reason I wanted to mod my Xbox was to mod Halo 2, and to do that I had to be able to get into my Xbox's files, particularly my Halo2 map files, and the only way to get to those files is to ftp to the Xbox and they only way to ftp to the Xbox is to mod it to allow for ftp'ing.
After going through all the technicalities with downloading the modding software to my Xbox then installing it properly I was able to ftp to the Xbox which allows me to alter any files that I wanted to. At first I just copied the .map files from Halo 2 to my computer, changed them (with some free software that i learned about on Se7enSins) and put them back on the Xbox. Eventually I wanted to see just what i could do with my Xbox. Again i went back to Se7ensins and read about other things you could do. I read about many different things you could do such as watching TV on the Xbox or browsing the web or copying disks. The two things I tried (and succeeded with) where putting a Super Nintendo Emulator on the Xbox, and putting a full Xbox game onto the hard drive of the Xbox.
Putting the Super Nintendo Emulator onto the Xbox was really simple, I just had to transfer the emulator (which was designed to run on the Xbox) files onto the xbox. Putting a full Xbox game onto the hard drive was also fairly easy, I just had to put in the game (of course i choose Halo 2) and use tools that were installed with the modding software and copy it to a game file on the Xbox, then play it. One reason I wanted to put the the full version of Halo onto the Xbox was so I could mod the maps that came already on the disk i.e. Lockout. Before the game was on the xbox i couldn't copy the files from cd onto my computer and put them back on the cd, that just wouldn't work, but with the files now on the Xbox itself i could just pull the .map files that came with the cd, modify them then put them back where I found them.
That was my experience with modding my Xbox and Halo 2.
Just a couple warnings that are kind of obvious: 1) Modding game then playing them online can have penalties depending on the game and the company's online policies for that game. For example, Bungie (the creators of Halo 2), if they detect that you have modified Halo 2 .map files on your Xbox then they will ban you from matchmaking and you will only be able to play in customs games (only with friends or friends of friends). 2) when modding an Xbox, or any other console, there is always a chance that you just completely fry your system, even if you follow all the instructions form the tutorials and have done everything right. So far I have modded three different Xboxes and all have gone smoothly, but you never know.
Xbox Tutorials page: http://www.se7ensins.com/forums/xbox-tutorials/
Halo 2 Tutorials: http://www.se7ensins.com/forums/halo-2/
Modding Tut. I used: URL was too Long :-/