We now know what causes the red ring of death. It seems Microsoft, rather than having someone like ATi design the Xbox 360′s GPU, went the cheap route, going straight to a Taiwanese manufacturer with its own designs.
In other words, Microsoft’s lackluster GPU design causes the console to overheat, leading to the red ring of death. In wanting to save a few dollars, Microsoft ended up costing itself $1 billion.
The moral of the story is, don’t half-ass your work.