No. You keep the HDD on the system like normal and you connect the new HDD to the cable end. If you are signed in and have the new update dash (which you should) then it should detect the cable and allow you to do a memory transfer. You don't even need the
disc anymore. But if you put the disc in (the one that came with the cable if you bought the 120GB officially. If you load the disc and click on it like you would a game now it's just going to take you to the memory thing and you can start the transfer.