Disc one is a mandatory one-time install, after which point you'll play the game with disc two in the drive. It's possible to install this as well, but "For optimal performance, we recommend not installing that disc," Rockstar wrote. "We will have more info on our Support Site at launch."
Depending on how much of a hit the game takes, I could see people installing the thing anyway to avoid their Xbox 360 making any more noise than is absolutely necessary.
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destructoid's previous coverage: Grand Theft Auto V