What is 3 Red Lights?

3 Red Lights (A.K.A. 3rlod A.K.A. RROD) is most Commonly Defined
by its secondary error code which can be found by
Holding the sync button and pressing eject 4 times as shown in this video.

The most common Error codes are 0102 (The 360 doesn't know what is wrong),
0020 (Missing GPU) and 0110 (Missing Memory).
Of Course its not actually missing the gpu or memory (although it could be if you were messing around)
It means one of the power or ground lines to the component isn't connected,
Therefore it really isn't there where the console is cornered.

Lets look at why this happens:
Ok, First off you have to understand
that Micro$oft didn't really know what they where doing when it came to the Xbox 360 (cooling system)
(and even the original Xbox if you can remember the security or lack there of).

Why are the Component Power and Ground Lines Coming disconnected?
It really depends on how you look at it and i believe there isn't just one cause
so I'm going to show you everything that contributes to it;

Poor Fan Controller Settings:
The Fan Controller in the Xbox 360 works like any computer fan controller,
When the Temperature Sensor (in the cpu and gpu) gets to a certain temperature the controller increases the speed of the fans.
In a PC Fan Controller the fans would be at max speed no later then
140º Fahrenheit, some with settings as low as 125º (all my pc's stay under 120º).
Unfortunately M$ decided to set the fan controller to speed up the fans at a lot higher temperature to keep the noise level down,
It doesn't significantly increase the speed of the fans until (either cpu or gpu reach) 170º

^The Air coming out the back of the 360 just before it shut off.

Alright, We Have Established that the Xbox 360 overheats,
If you need more proof take a look at the clay compound boiling and dripping
off this 3 month old Console's Heatsink.

Now that we have covered the overheating issue lets move on to the X-Clamps.
The X-Clamps are M$'s way of Mounting the Heatsink's to the Motherboard,
there not a bad design they are just poorly implemented.
First off they don't keep the heatsink on the motherboard tight enough
which causes poor heat dispersion, if the heat cant get to the heatsink how is it going to leave the console?

You shouldn't be able to see the processor, also take a look at the peg to the right, that bolt should be flush with the board.

On top of them being loosely fitted they cause uneven pressure points:

Which after Heating and Cooling from around 70ºF to around 150ºF
Cause the entire Motherboard to warp:

And all of this Leads up to
The Component Power, Ground and Info Lines Coming Disconnected.

Think of those Solder Globs that connect the cpu, gpu, north bridge and HANA to the motherboard as Pins on a cpu, if even one isn't connected it doesn't work.

Ok, Why don't we see more problems with the CPU?

Well we do, 0022 (boot loader problem, usually a problem with the cpu, in rare occasions it can be the NAND Flash)
isn't as common as the 3 error codes mentioned above but it is 4th on the list,
the reason we don't see more 0022's is because of the design of the cooling system,
the gpu just wasn't meant to have that tiny heatsink on it
and the cpu actually dose get a good amount of air thru it
(still not nearly enough to keep it at a temp it should be).

Disgusting i know but its a great example of how little air gets thru the gpu heatsink (left).

What Do You Do To Prevent This?

I do the 12v (Full Speed) Fan Mod and"Heatsink Upgrade" for Better Heat Dispersion which involves:
Removing the Heatsink's, Sanding them Down (lapping) to 2000, Reapplying with a Better Thermal Compound
and Placing a Piece of Light Cardboard over the GPU Heatsink for Better Airflow
These Services Can Be Found in the Shop>Mods Section of this Site As "3RLOD Prevention".

What Do You Do To Fix 3 Red Lights?

I Use a Professional Rework Station to Reflow the GPU and/or CPU.
For Preventive Measures I Replace the X-Clamp on the GPU and/or CPU (to prevent the board from warping further)
and i also do the Heatsink Upgrade and 12v Fan Mod, You can Find this Service in the Shop>Repair Section of this Site.

Why You Should Never Do the "Towel Trick"

Remember the Bad Design of the 360, Well it gets worse,
The main Capacitors (used to regulate Amp's) on the board are placed too close to the CPU Heatsink
with the overheating problem the CPU is already pushing the temperature of the capacitors above what it should be,
when you do the towel trick it traps all the heat in the console and amplify's this problem to the point that
the liquid in the capacitors expand and will even breach the container, take a look.

The Capacitors before Towel Trick^ (the tops are flat and no liquid has spilled)

The Capacitors after Towel Trick^ (the tops are bubbled and liquid has spilled out the top)

If you have done the towel trick and are having problems with
the 360 Freezing (but not returning to 3rlod) then you have most likely blown some capacitors
and killed a major component on the board, at this time your 360 would be scrap.