Because DVDs are so simple to copy, Microsoft have invested a lot in making their games as copy-proof as possible. They have done this by using "security sectors" as copyright protection. Security sector's are a small part of the game DVD, which stores information about the game - notably, its name and a unique "game code." Whenever you put your original discs into your Xbox, it looks for these security sectors and if it finds them intact, it plays the game.
The problem is that since these security sectors have been burnt onto the game disc in a special way by Microsoft, it's almost impossible to find a way to copy them onto backup / blank discs. What happens when you copy most Xbox games, is that your PC cannot read the entire disc, meaning that it will just copy the game and leave the security sectors. This means that when you try and play this dud copy, your console will not be able to find any of the security sectors and will refuse to play the game.
This is the reason why Xbox 360 mod chips are so popular - because they make your console bypass the security sectors, meaning you can play all sorts of copied games on your console. However, if you don't want to void the warranty and get a mod chip, you can copy and play Xbox 360 games if you can use a tool / technique which is able to make perfect 1:1 copies of the games, which include the security sectors. The Xbox console does not know if the disc is an original or a copy - it just looks at the data that's on the disc, and if you can duplicate it directly, then you'll be able to play all the copied games you want on your system.
You can actually copy Xbox360 games very easily with a tool called "GameBackupSystem". This tool has been created by an anonymous team, but we were able to backup and play 20+ Xbox360 games with it. It copies your game discs perfectly, including the copyright protection sectors. This means that you can copy as many games as you want with the system, and then play them on your console without a mod chip.
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