If you're playing on XBox Live, you really need a headset. Most games involve voice coordination between people on the same team, and sometimes even discussions with your opponents.
This headset is relatively inexpensive, and has a padded earphone and microphone. The earphone is adjustable, to have the headband part expand and contract. This lets it fit on larger and smaller heads. The microphone rotates, so that the unit can be worn on the left or right side. It only spins down to just under a 90 degree angle, though, so this forces you to wear the headset with the band right over the top of your head. At that spot, the microphone is pretty much right in front of my mouth (I prefer it a bit lower) and the opposite-side "bracer" part is digging into the skin just over my non-earphoned ear.
I don't know what it is with these headset creators - but at its smallest setting, the unit is still too large for several adults I know. That makes it even worse for teens and kids! That being said, I find this problem with a lot of headsets, so it's something you just have to deal with.
There's a relatively long cord, and it plugs right into the base of your controller. It doesn't interfere at all with wireless controllers. The base part has a mute button as well as a volume control.
I didn't have any problem at all hearing other players when I was online - their voices came through very clearly. Also, the unit fit very snugly into the base - I didn't have any problems with static or dropped signals. In fact for a while I was letting my boyfriend drive in PGR3 while I talked in the headphone/mic, and even with the cord stretched out between us two I could hear fine. Other players could hear me. I didn't notice any issues with lag, our conversations went back and forth rather quickly.
Buy XBox 360 Headset from Amazon.com