On PS3, if your console dies you just deactivate your PSN account(s) on the old console via Sony's website and activate the PSN account on the new console and you have access to your downloaded games/dlc.
How does it work on xbox 360? I'm assuming you just start up the new console and select the "download profile" option? Then do you go to their website and do the license transfer? Or is there something one needs to do BEFORE the old console breaks to prevent loss of downloaded content.
No, you do the license transfer after on the new console, but it can only be done once per year. You just download your profile to the new console and then go into your download history and you can redownload your games and content. Or you can just transfer them to the new console to save time and then just do the license transfer.
I see. The once a year restriction is a bit questionable. But I guess not many people (myself included) are going to buy >1 360 in the timespan of 1 year. --- http://www.gamefaqs.com/boards/615804-the-elder-scrolls-v-skyrim/64275451 - Skyrim Level 81 Guide
The year restriction was eased a LONG time ago. It was changed at least a year ago, if not two. You can now do it something like once every 3-4 months?
The "unrecognized disc" or similar error is the second worst problem with 360s. Basically something goes wrong with the laser (someone else can clarify), and discs either don't read at all, or game discs will be recognized as media DVDs (making the games unplayable).
It's a mechanical/alignment issue. Usually if you just try over and over again, the disc will eventually suddenly work. Other fixes range from simply pushing down on the top of the console as you insert the disc to actually opening the system up and fixing the relatively simple issue itself.
I had the problem years ago with my Elite. I dealt with it for 2-3 months, sometimes trying a disc 30-40 times before I got it to work. But after a long and frustrating time, the problem suddenly and magically went away. My 360 has had no problems for several years now. I'm still looking for someone else who has had the same experience as me.