Will the Xbox 360 Slim wipe an external hard drive's memory in the formatting process?

Solution 1:

If your device is large enough (the minimum is 1 GB) you can ask the Xbox 360 to create a file on the drive of a size you specify, up to 16 GB total. The Xbox 360 can then store it's data inside this file. You will have to specify this external device when creating or loading a save game or starting a download.

Creating this file will not destroy the other data on the disk. However, the device must be formatted in FAT32, which has a size limitation of 32 GB. You might have to create a couple of partitions on the drive in order to use it for both Xbox 360 data and other data. A better option might be to pick up a 16 GB USB key, since that's all the Xbox 360 can use on an external device anyway.

Microsoft has a help article on the Xbox website that might be good reading before you begin. They recommend you buy their branded USB device, but most USB 2.0 or higher compatible devices should work fine.