I've my XBOX360 for about 3 weeks now. I noticed that the time always reset to year 2005 each time i restart the machine.

Why is this happening? Is it because there's some problem with the console or does it have a battery that needs replacement?? Pls advise!

I disagree. The SEGA Saturn has a CMOS with an internal battery. It last for years without needed to be change. It's really easy to change, no hassle at all. MS is just being cheapskate.