There are many theories as to why Microsoft decided to call it the 360 instead of just Xbox 2.
Some would have you think that it is because they thought Xbox 2 would sound inferior to Playstation 3, Sony's upcoming game console. Of course, this is Microsoft we're talking about, so we're not going to give them that much credit. Instead, we'll say that this was their attempt at ripping off the name of Nintendo's new system, then codenamed the 'Revolution'. 360 is the number of degrees in a full rotation, therefore it could be called a revolution, amirite? How craptacular of you, Bill Gates. A related theory is that the '360' is meant to imply that the device is a 'revolution' in console gaming - This is very likely as only pussy-starved nerds like Bill Gates could equate safe, comfortable video games with ZOMG COOL BURNING DEATH CHE GUEVARRA LULZ.
However, a rapidly growing theory is that it took Bill Gates 359 prototypes to get it right.
And yet another theory is that its called 360 because they wanted to turn the original Xbox's shitiness around 360 degrees... or 180 degrees... or whatever... meaning they knew the flaws of the Xbox but did nothing to fix them in any way.
And still yet another theory exists; this one probably the most popular of the bunch. The complex thought process of this theory can be easily summed up in the following lines:
Why do they call it the Xbox 360?
Because when you see it, you'll turn 360 degrees and walk away.
There are two sides to the debate surrounding this theory, based on the individual's reaction to the above hypothesis. Party one, composed of retards and trolls, believes this to be both a reasonable assumption and a great insult to 360 fanboys. The other party contests that turning 360 degrees would leave you still facing the console, and that the correct rotation is actually 180 degrees. This side of the argument is composed of intelligent individuals and those too stupid to realize they've been trolled.
This unassailable argument has become something of a meme on the internet (and a very annoying one at that), most notably on 4chan, the home of irritating, retarded memes. It started on 4chan's videogame board, but soon spread like a California wildfire to other boards. Experts are still unable to determine if the original post was made by a fucking moron or a clever troll. All that is known is that people continue to post this message in hopes of stirring up drama, even months after the meme has gone out of style.
There are many amusing responses and counters to this trolling attempt. For instance, it is never stated that the viewing party cannot "moonwalk" away from the console. So,
"When you see it, you'll turn 360 degrees and moonwalk away." It is also never stated whether you were directly facing the console when you saw it, or whether you happened to catch a glimpse out of you peripheral vision. A couple alterations include:
"Why do they call it the PS3? Because when you see it, you'll turn 3 degrees and walk slightly askew."
and
"Why do they call it the Atari 2600? Because when you see it, you'll turn 2600 hundred degrees, be extremely dizzy, and possibly vomit."
and
"Why do they call it the Wii? perhaps when you see it you piss on it and walk in the same direction over it"
As well as any other devastatingly witty variations you can think up. Of course, the most effective response when faced with this situation is to simply call the OP a faggot, turn 360 degrees, and walk away from your computer.