The eeprom is a chip on your motherboard that locks your motherboard with your hard drive so you cant use your motherboard with a different hard drive or your hard drive with a different motherboard. If you mod your xbox it will create a dump of your eeprom called eeprom.bin which is usually located in your e drive. you can use this eeprom.bin to lock a different hard drive to your motherboard or unlock your hard drive to be used elsware.
If you have a softmodded Xbox you should ALWAYS make a copy of your EEPROM file with an auto installer disc like AID or Slayer 2.7 and set up an FTP connection. Then FTP a copy of your EEPROM file and store it on your PC. If you ever run into any errors and need to format and rebuild the drive, or want to install a larger hrd drive you will need that file on your PC.