Even though GTA V has mostly delivered more or less of what was expected of it, it still suffers from a technical issue that has been identified and affirmed by Rockstar itself. The game tends to lag very badly when the “play” disc is installed on the Xbox 360.
Rockstar suggested gamers not to install the second disc in order to ensure ‘optimal performance’, stating so on Twitter.
They weren’t really clear on the consequences though, but it turns up installing the second disc will resulting in serious drop in frame rates and occasional pop-ins, which is a serious setback to such a high-caliber game.
Fear not, fellow gamers, for there is a workaround to this problem. If you are still wishing to install the content of the second disc. However, you won’t be installing it on your Xbox 360’s HDD. Yes, you heard me right.
Instead, what you will be doing is this:
You’ll complete the mandatory install of Disc 1 on the Xbox 360 HDD, which is pretty obvious. Once you have it installed, you’ll need to skip the install of “Play” Disc 2 on your HDD. Plug in a 16gb USB drive into your Xbox 360, and install it on that instead.
If you have a fast enough USB drive speed, there will be no lag issue whatsoever, and you can enjoy your GTA experience to the fullest.
Source. Digital Foundry