Hard mod is called "spoofing" in which they replace your DVD Drive (which is unable to read pirated DVDs) with an already hacked drive (which can run and play pirated DVDs). Problem with this type of flashing is that you won't be able to play new games such as Assassins Creed: Brotherhood, COD: BO, etc.
Soft mod is called flashing. The hack is called LT+ (which is not out for Slim Xboxes yet). Thats why the ones you saw in the market are hard modded, since the hack for Slims isn't out yet, and might not be out till a month or so depending on the type of DVD drive you have.
Soft mod is better since it'll allow you to play on Live stealthily, whereas spoofing (hard modding) will cause you to be banned from online play on an Xbox forever.
Spoofing rates are around 2000 RS per Xbox. LT+ hacking (when released) might be for 1000 RS or 2000 RS depending on the difficulty to perform the hack.
There is an enclosure on an Xbox Slim on the right hand vent of the Xbox. All you need to do is to press the springy button and the cover pops out. In there, you can insert a flashed Western Digital 250 GB
BEVT drives, and it'll read them properly, which'll cost you around 5K RS. Whereas if you buy an official drive from Microsoft (available on PG store), you'll have to spend around 8-9K RS for it.
A USB can be inserted, and an Xbox will read it. But the problem is that no matter what size the USB drive has, the Xbox will only read 16 GB of it
There is no modification to increase this reading limit either (MS will lose all its Hard Disk selling business if they allow more than 16 GB reading limit).