Verified answer

Disk 2 contains the expansions. Put it in first and it will load them. Then use Disk 1 to play. You only need to use Disk 2 once and then use #1 like you would any other game.

I believe you have Game of the Year and that the second disc has bonus material. You may need to "INSTALL" disc 2 idk but i have never needed two discs to play the game on the 360 and ive played, but not owned, TES Oblivion