Xbox softmod (short for software modification) is a term used to refer to modifying a Xbox without altering the hardware (which typically uses a modification chip or 'modchip').
Softmods for Xbox used to include a font exploit installed through exploits in savegame code for MechAssault, Tom Clancy's Splinter Cell (not Pandora Tomorrow), Double agent, and 007: Agent Under Fire. For Mechassault, you need an original version. Platinum Hits and newer versions will not work. For 007 AUF, a certain version of platinum hits may work, but newer ones will not. For Splinter Cell, any version will work. Originally, via a piece of software called "MechInstaller" created by members of the Xbox-linux team, an additional option could be added to the Xbox Dashboard for booting Linux. The Font-hack works by exploiting a buffer underflow in the Xbox font loader which is part of the dashboard. Unfortunately, since the Xbox requires the clock to be valid and the dashboard itself is where you set the clock there is problem if the RTC backup capacitor discharges. The Xbox will detect that the clock is not set and therefore force the dashboard to be loaded which then promptly reboots due to the buffer overflow exploit. Upon restarting, the Xbox detects the clock is invalid and the process repeats. This became known as the infamous "clockloop". Newer exploits such as Nkpacker, however, have solved the clockloop problem.
Another exploit, released on the same day as the font hack, relied upon a mishandled music indexing file. The exploit is triggered by going into the audio menu which avoids the problem with the font exploit, though this produced problems for in game music, the extent of which varied from game to game. The Audio and Font Hacks are mostly outdated as Microsoft has made the exploitable properties of these files obsolete. The favoured exploitable dashboard (version 4920) in fact no longer even runs on the latest kernels.
A further exploit, colloquially known as "doubledash", solved the clock loop problem for the earlier kernels. It was shown that earlier dashboards loaded their font files from different locations to the later ones. A program that the dashboard launched (xonline.xbe) was replaced with an earlier dashboard. This meant the first loaded fonts could remain untouched, but when the Xbox live tab was selected, the dashboard would attempt to run xonline.xbe. Having been replaced with one of the early dashboards, and with appropriate fonts in the alternate loading location, the font hack would run. When this was prevented, by having the dashboard check the xonline.xbe, an easter egg left within the dashboard was exploited. It was found that a secret easter egg would launch another program. Once replaced, this could act in the same way as the doubledash exploit.
Later kernels prevented such an attack, but it was found that during the Xbox live update from an early dashboard, an intermediate dashboard would be loaded that was not blacklisted but was susceptible to all the same hacks as the original 4920. Not only this, but it was found that some exploitable programs that lay within it had alternate font loading locations. The potential was limitless, and from this came the now almost ubiquitous UXE and nDure softmods.
With new technology and installers, softmodding has become an easy and reliable way to mod an Xbox. It is now considered an everyman's solution to a modded Xbox.
An alternative to softmodding is to actually reprogram the onboard flash chip in older revisions of the Xbox. On earlier models, it is possible to overwrite the stock BIOS with a modified one by using one of the gamesave exploits. However, Microsoft is more easily able to detect such softmodding due to the inability to disable the modified BIOS and also will ban the user's Xboxes (not their accounts) from Xbox Live, though this is moot since Microsoft ended the Xbox live service for the original Xbox in early 2010.
All softmodding of Xboxes is considered a violation of warranty and runs the risk of rendering an Xbox almost unusable if not performed properly. Since the U.S. Copywrite Office made the decision that hacking iPhones and other mobile devices is legal, it can be safely assumed that the consumer has the same right to modify their hardware with the Xbox.