Anyone with an Xbox 360 Arcade enjoying the New Xbox Experience will be aware it's necessary to have a 256MB memory card plugged in to use it; hardly the most elegant solution. Microsoft knows this, though, which is why new Xbox 360 consoles are being made with 256MB of storage onboard, negating the need for any external device to be plugged in.
The upgrade was already rumoured around the web, but there was some speculation it might not be across the board. Luckily for the worried or curious, Microsoft was good enough to confirm the improvement to Xbox360Fanboy, saying: "We are constantly updating the console's more than 1700 internal components. We can confirm that we are moving to internal memory for the Xbox 360 Arcade. The physical internal memory is the same size as the previous external memory units - 256MB."
Obviously this does slightly reduce the flexibility of the platform - demos and saves on this internal 256MB of memory aren't transferable. Nonetheless, it's a much more elegant solution and it's not exactly hard to buy an external memory card should one be wanted.
Oddly enough the price isn't going to change as a result of the hardware upgrade. Now we just need a consistent way of telling which consoles have internal and which consoles have external memory without taking then out of the box. Good luck with that.