Microsoft are working on a new disc format for the Xbox 360 which would allow developers to utilise a little bit more space on the standard DVD.
A source close to Digital Foundry confirmed that while current Xbox 360 games are restricted to using only 6.8GB out of the 7.95GB available on a standard DVD, the new format would allow them to use closer to 7.8GB.
Regulations dictate that 1GB of the DVD is partitioned away for anti-piracy measures, which Microsoft are looking to do away with, as they look to try and prolong the lifespan of their console. They're also experimenting with new anti-piracy measures for the new type of DVD.
Source: Digital Foundry