It's possible to get a 16 GB USB flash drive for your computer for under $35. Microsoft's new 16 GB Xbox 360 flash drive? $70! There is also an 8 GB drive that's retailing for around $35. That's more expensive than most stores are now selling the 20 GB hard disk drive for!
Unlike the PS3 and Wii, Microsoft had closed off the Xbox 360 from external storage devices. The competing consoles allow gamers to transfer their save files and media content to an SD card, or with the PS3 anything can be backed up to any storage device that connects to USB. There is a workaround to allow this for the Xbox 360, but it's not a native feature.
Microsoft is cashing in on requiring proprietary storage mediums for its console, though. And this is the price for having a large amount of storage space on a small device.
If it's any consolation, the USB drives, which are manufactured by SanDisk, come with a free month of Xbox Live Gold...but that's only worth around $8.