Major Nelson has given more details regarding the story we reported earlier that USB thumb drive support will be coming to the Xbox 360. On April 6th a system update will roll out that enables support for the Xbox 360 to save data to up to two USB thumb drives.
Microsoft is also partnering with SanDisk to sell a Xbox 360 branded thumb drive that comes configured out of the box to work with your console. I shudder to think what the price of this drive will be. 16GB thumb drives cost around $30 on up, but I expect the Xbox branding will push it into the $50 range.