Each kiosk had a wired Xbox 360 controller connected to it, running into the base of the kiosk that only had one small window showing off a Xbox 360 console.

But the console itself wasn't on, looking at the right of the kiosk you get to see the actual power behind the demos:

 

A pair of Apple Powermac G5 systems were actually running the Xbox 360 demos, not the 360 console. The consoles in the kiosks weren't actually running, they were just for show - now you know why all the controllers were wired.

Because the G5 systems can only use a GeForce 6800 Ultra or an ATI Radeon X800 XT, developers had to significantly reduce the image quality of their demos - which explains their lack luster appearance. Anti-aliasing wasn't enabled on any of the demos, while the final Xbox 360 console will have 4X AA enabled on all titles.