Following the appearance of raw 360 game dumps showing up around the net, a team has released the source code for a tool to extract usable files out of them. This is still a far cry away from being able to pirate games on the 360, the system still needs to be hacked.
Here's Microsoft's dilemna. Many of the people who want the system hacked have no desire to see games pirated or to see cheaters be given a way into the system. But there's a similar urge to use the hardware to the fullest extent, which has been intentionally crippled. Case in point: Mac users are unable to take advantage of many of the 360's media features, not because the Mac can't but because the 360 won't allow it. Should Microsoft decide to play nice, it would remove the impetus for many hackers...