3 main classes of chip.
1) Drivechip
2) On drive chip
3) some kind of motherboard mod.
A drivechip is kind of like the wii stuff. It will be a device between the DVD drive and the sata port on the motherboard. It should then have a fairly obvious external port. Congrats if you got one like this, they are not rare or all that expensive but they did not know what they were selling if it is.
A DVD/on drive chip. The 360 DVD drive does a lot of authentication so you can flash the DVD drive and play copied DVD. Some of the various models either needed chips to flash or benefited from them. If you are unlucky then it will be a really old chip for a really old drive model, if it is on a recent dashboard and still works then it is probably not going to be this.
http://www.360drives.com/howto
Some people also used chipped as a verb for any kind of hack (see also misuse of the term jailbroken) so it could also be that. Drive flashing is the most common mod and for most models, firmwares and drive types it will not have anything removed, damaged or soldered on.
http://bazicenter.com/tutorial/Download_Center/Firmware_Tools/JungleFlasher1.66.pdf should do for a basic overview.
Your basic flashed DVD drive will not do anything with an external USB.
The motherboard stuff can vary. There are some mods for various non hacking purposes (12 fan mods, 12V sata mods, case LEDs and other such things) but they will generally be obvious as mod hacking base mods are concentrated in the middle of the board and have lots of wires.
There are 5 main classes of mod
1) King Kong. You will likely not see this, it is good if you do though as you can upgrade it to JTAG.
2) JTAG. Arguably the best mod for the system if you do not care about xbox live.
3) RGH (reset glitch hack). JTAG would have been some diodes and fun things you could have done with a trip to a basic electronics shop. This will have a chip, likely some kind of branded chip, in there.
4) RGHv2. RGH is great but some people refined it. For the most part it looks pretty similar and there will be some kind of PCB in there.
5) Dual NAND. Mainly an extra for 3 and 4. It allows you to have dual nand on your 360 and have one image for hacked and another for stock for online play. I do not much care for it myself (very annoying to keep updated and clean and for the effort you might as well just buy an online box).
Speaking of NAND then someone might have just soldered in the NAND dumping setup for some reason but nothing else. This is doubtful though.
In any case if it is a hacking based motherboard mod then you are going to want some files and keys so you can build new NAND images. If they are good then you would have been given them or they would have been taped inside the box or something. At one point dumping them from a flashed box such that you could build new stuff was fiddly and annoying but it should be OK these days, though it still might be marginally more annoying than having the original dumps to use. If it is this kind of mod then do try to email them and get them sent over.
Technically you might not have to do this right away if it is already set up on a later dashboard and you do not care for the very latest games but you will want to do it before too long.
Once it is updated to whatever you want then there should be some program in the dashboard. I quite xexmenu myself but most will tell you to go with freestyle dash, and these days it probably does have the edge in features/game loading. Oh and as the 360 has its own hard drive, one you can make to be any size if you have a motherboard mod, then you can install and run things off that. It is typically a bit faster and less cumbersome than messing with DVD drives which is nice.
I am not going to go through all of this as it would take ages and might not even benefit you.
