There are a couple of different opinions concerning what causes the three red ring error but one thing is agreed, the Xbox 360 overheats.
And the reason it overheats is because of the compact design, not enough airflow and the GPU under the DVD player.
So that still doesn't explain the 3 red ring error.
Well one of the main suspects lies with the cold soldering technique that is used for the processor chips.
Some experts say that the processor chips do not allow the heat to flow properly when the lead free solder is used on the motherboard resulting in what looks like a cold solder joint.
Since the console is constantly heating and cooling this causes the alleged compromised solder joints to develop voids and even crack.
The result is processor pins that may not be making contact with the motherboard.
So cold soldering in conjunction with a compact overheating prone console design are the prime suspects of RROD.
Can it be fixed? There are multiple fixes floating around on the internet that range from wrapping the Xbox 360 up in a towel to putting it in a ice bath, neither of which anyone recommends.
There is only one that appears to be a permanent solution and that is the X-clamp fix.
Part of this fix entails putting thermal paste between the heat sinks and processors and overheating the GPU in particular.
The intent is to allow better heat dissipation for the processors and attempt to re-solder the pins.
Multiple sites indicate a success rate of 90% with this technique.
There are also free instructions and videos on the internet that detail how to perform this fix if you are so inclined to take on this fix yourself.
If the unit is under warranty Microsoft will fix this problem.
If not the X-clamp fix is probably your best bet.