I am guessing its starting to overheat. Or the video card is dying on it.
It looks as if you took the fan off the CPU from a computer while playing a game. (if you ever have done just to answer the "what if….?")

But not sure, i have it laying on a big BOX fan right now to keep it cool, but still after about 10mins of halo3, or just 2mins of rockband, or 30secs of GTA4 it will start to display a digital snowy effect.

Anything that i can do to help it out?
I am past warrenty, so i am going to hold onto it as long as i can before i send it in for repair.
None smoker, dust free, and i keep my rooom COOL and i use box fans as a cooling system for my computers that i build.
I keep my xbox upright and about 1 feet from the wall and used to have a fan sucking air from the backside, but it was a weak fan.

So pretty much just screwed then. Once it dies i'll pay the 100$ to get a replacement, erm "repair"