I was just reading about this not more then 2 mins ago.
Apparently the main reason that the 360 RROD's is this crappy X-Clamp they use to bolt the heats sinks onto the CPU/GPU. The way they spread their force causes the motherboard to flex up. Given time and a bit of heat the solder points around the GPU or CPU start to melt and the warping causes the connection to break.
The Towel trick helps by melting the solder points back and hopefully make a connection. The warping of the Mobo still exists though.
Extensive X-Clamp Fix
is an excellent explanation and fix for the root causes of RROD. Check it out.
There are easier fixes, but this is the most comprehensive.