Unlike the original Xbox, the 360 is not a modded PC. It's a gaming system from the ground up, and has some very good pipelines set up between the 3-core CPU, GPU and memory. This includes the GPU itself (i.e., it's not a modded version of a Radeon GPU.) It's designed specifically for, and in concert with, the rest of the hardware design. The claimed overall performance is 1 TFLOP. (Sony claims 2 for the PS3.) The OS is not Windows/DX, but considering the source, it's got to be similar. My guess is that it's some focused subset of those software technologies.
Don't tell me that it can't do Crysis technically. I won't believe it. If it's aimed at a different group of gamers, then that's another story.