Editors' note: As of September 2009, Microsoft will only sell two Xbox 360 models. The Xbox 360 Arcade is the entry-level model of the two. Unlike the company's premium offering--the Xbox 360 Elite--the Arcade only comes with 256MB of storage, no headset, and no network cable. Besides these omissions, and the fact that the Arcade is white, there are no other differences among the two offerings.
However, as a result, in its default out-of-the-box configuration, the Xbox 360 Arcade's limited storage capacity precludes it from being able to play original Xbox games and download most content (such as demos and videos) from Xbox Live's online Marketplace.
We cannot fully recommend the Xbox 360 Arcade for the fact that it is missing a hard drive--somewhat of a must-have accessory for the console if you're interested in saving game progress or playing original Xbox games. Although an add-on hard drive can be purchased for the Xbox 360 Arcade (120GB for $140), the combined price brings the overall cost above what you'd pay for the superior Xbox 360 Elite.