It's not too difficult when you figure it out. I have the older phat Xbox. It's supposed to be harder to do on the newer ones because of their drives. It is basically flashing the Xbox with a customized firmware. So, you need the right tools, a good
(you need an account to see links), and a really good understanding of how it all works. I play online on my Xbox and I'm fine. Don't fall for the rumors of being banned for playing with a modded Xbox online. If you know what you are doing then you'll be fine.
Just a heads up.. to stay safe from being banned it takes two things:
1) Properly mod your Xbox
2) Properly burn your games. You need an application called abgx360 that patches the game image (ISO) so that it is good to play online without worrying M$ will catch you.
Oh, and 3) is to not play games before release date because they are always leaked a week, sometimes a month ahead. But we all know not to do that.