Problems with your Xbox 360 console can often be resolved by removing temporary files and data from the system cache. The cache stores such items as game updates, system update installation packages, and gamer pictures of your friends.
Clearing the Xbox 360 cache does not remove your gamertag, content that you have downloaded, game files or console software updates.
Clearing the cache does however temporarily removes previously downloaded game updates. You will be prompted to download these updates again the next time you try to play the games.
To clear the system cache
Source = IGN Wiki