I've been playing w/ Apple TV for the past day. (Nice to get demo equipment from work...)
I'm surprised to say that it is actually quite useful. I have it hooked up to our kitchen LCD. From there, I am sharing my iTunes from 2 Macs in our house. I can stream playlists and videos. The vids are from iTunes and DVDs/Tivo shows ripped to MPEG4, no xvid or divx tried yet. I haven't tried photos yet. You can also stream trailers from Apple in real time. It is a very nice option to be able to use the same playlists that are synced to my iPod.
PQ quality is fine. At work, we streamed to a 50" 1080p and the Cars trailer looked better than it does on an iPod. At home on my 4:3 LCD, it's fine. Apple TV isn't optimized for 4:3, only 16:9, so video content is a little squished. But I'm using it more for music/podcasts/books so for that, it's great. You will need to keep your PCs/Macs on to share the iTunes libraries.
As long as you're OK w/ giving in to itunes' DRM, you may be pleasantly surprised w/ Apple TV.
