It applies only in the case of the 3 flashing red rings, but it's a good thing to have that extra coverage, the 360's failure rate is massive. Here's the skinny:
http://www.xbox.com/en-US/support/systemsetup/xbox360/resources/warranty.htm
A. WARRANTIES
http://www.xbox.com/en-US/support/systemsetup/xbox360/resources/warranty.htm
A. WARRANTIES
- One Year Express Warranty on Console (Three Years for Three Lights Flashing Red). Subject to the terms and conditions of this Limited Warranty, Microsoft warrants to you only (the original retail purchaser) that, during the Warranty Period and under normal use and service, the Xbox® Console will substantially conform with the printed user instruction materials packaged with the Console.
