Lua is an excellent little language designed to be emedded in C programs. Being both easily embeddable and very small in foot print, it has rapidly become THE script language of choice throughout the games industry. Diverse games such as Grim Fandango, World of Warcraft, Heavenly Sword and many more have used to allow safe customisation away from the main game code.
XNA is based on the .NET CLR Framework and on the PC you can use LuaInterface to embed Lua into XNA, however this won't work on Xbox 360 as LuaInterface uses unmanaged code which isn't supported on the Xbox 360 under Game Studio Express. The main difficulty is that Lua is written in ANSI C and the range of supported languages on Xbox 360 doesn't include C/C++ yet (it does include Safe C++/CLI but this requires massive changes to the code, as much as re-writting Lua into C#).