In the video, "Some Xbox Series Optimized games CAN run on external drives," the presenter discusses the limitations of the storage options for the Xbox Series S and X consoles. While both consoles offer Legacy USB expansion ports, the storage is restricted to Xbox One, Xbox 360, and OG Xbox games via backward compatibility. Xbox Series Optimized games will not run on external storage and must be installed on the internal drive or storage expansion card to play. However, the presenter discovered that some Xbox Series Optimized games can be moved to external USB storage and run from there. These games are known as Xbox One Gen 9 aware titles, which are originally Xbox One games with enhancements for Series S and X. By selecting manage games and add-ons, then file info, users can determine which games can be moved and run from external storage.