A Digital Foundry source claims that the "new disc format" that Microsoft will implement in the next Xbox 360 update will free an extra gigabyte of the disc for game data. Where would you find an extra GB on a DVD? "The maximum space allocated to game data on the current disc format is just 6.8GB out of a maximum of 7.95GB on a standard dual layer DVD," Digital Foundry explains, "with over 1GB dedicated to a DVD-Video partition that also contained anti-piracy security sectors." That partition will be "drastically reduced or omitted completely" in the update, the source claims.
The site notes that this partition was likely located on the innermost part of the DVD, which is slower to access. Thus, it's suggested that developers taking advantage of the extra space will have to account for increased loading time.