it doesnt matter how you keep your xbox360 sitting, but the smart way would be on its side, if standing vertical make sure nothing hits it or there goes your disc
I don't think it really matters wether you keep it horizontal or vertical. I guess it depends on the person and the 360's living condtions. Since I have a cat and a 2 year old just to be safe I keep it horizontal. I don't want to risk and accidents.
its sorta of a double edged sword...on the side less ventalation, but setting up strait it could fall and possible scratch a game...and sometimes even if it doesnt fall... =S
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