If your TV supports HMDI and your XBox 360 supports HDMI (older versions just don't have it), use an HDMI cable. It is a digital connection and gives the best quality. HDMI can transfer both audio and video.

You can buy a cheap cable for a couple of bucks and it will work just fine. You don't need and HDMI cable with xbox its name, just get an HDMI 1.3b cable (although 1.3a will work fine with xbox 360 as well). I got my HDMI (2 meter) 6 foot cable HQ 1080P 1.3b for $1.70 and have been using it for 18 months already.

VGA and component can transfer HD video as well, but it is analog. You may not notice any difference though.