It's only a rumor...for now...
http://kotaku.com/5063787/rumor-next-xbox-to-be-forward-compatible
The third Xbox installment will be "Forward Compatible" which will provide graphical and performance updates to Xbox 360 titles. This ranges from increased draw distance, improved framerate, or perhaps even new DLC. This would be the equivalent of upgrading your PC video card to allow for higher graphical settings. This, of course, will only apply to games still in development for the 360.
http://kotaku.com/5063787/rumor-next-xbox-to-be-forward-compatible