Found this over at HomeLan:
"One of the big things about the Xbox itself is the built in Ethernet and hard drive which means that there won"t be any extra hardware you will have to buy in order to use Xbox Live. However, you might have to buy an extra Ethernet cable to hook the Xbox Live to your cable or DSL modem if you don"t have one ready. In my particular set up at my office, my DSL modem is USB enabled which means I had to hook up my Xbox to my PC"s Ethernet card in order for it to work. While this particular set-up is not in the manuals for Xbox Live it does work out fine."