Digital Millennium Copyright Act - 17 U.S.C Sec. 1201(a)(1)"... no person shall circumvent a technological measure that effectively controls access to a work protected under this title."
Bill lives upstairs and comes for dinner all the timeNo, unless microsoft lives with you...
Saved.In the United States, it is illegal to circumvent copy protection measures under the DMCA (Digital Millennium Copyright Act):
Digital Millennium Copyright Act - 17 U.S.C Sec. 1201(a)(1)
(Section 1201(a)(3) goes into more detail as to what they mean)
JTagging, DVD firmware hacking or jailbreaking a console circumvents copy protection so, yes, technically it is illegal. Although few people have been to court over this, and those who have were mostly modding lots of consoles and providing copied games with the consoles (that's just asking for trouble).
Realistically, no one will go after a person doing this to his own console or a few friends. It's just not worth the time and effort.
Playing copied games on Xbox Live is a breach of their Terms of Service which you agreed to when you signed up, but again, they won't come after you. They just ban your console for breaking the agreement.
Similar laws exist in the EU (some countries like Italy and Spain have a "different interpretation" of that law and say that what someone does with a console they purchased is up to them).
Student Arrested for Jailbreaking Games Consoles - Wired.com
Xbox chipper gets prison and fine - Pinsent Mansons LLP