If you own the game and are simply making a backup file then it is completely legal. If you are copying the game with the intention of selling it or loaning to to someone else, it is highly illegal.
It is only legal to make copies of Xbox games if you actually own the game itself. It is illegal to rent or borrow games and make copies of them. You also are not permitted by law to sell or distribute the copied games in any way. This method should be purely for backing up your games should anything happen.
Yes there is a way to copy Xbox games. However it is illegal to make copies of games even if they are just for a backup copy of it. Also even if you do manage to copy the game you would need to modify the xbox or make a boot disc just to play the game.
If the games belong to you, and you want to, say, make a copy as a backup, or for kids to use upstairs on another unit, that's fine. You cannot copy them to sell to or share with people who otherwise would purchase them.
