Zarak,
An HTPC can serve a couple of functions. First and foremost is the ability to act as a scaler. Individual scalers usually start at $2000 and head up toward $6k quickly. This functionality has been built into every VGA chip for a very long time so just about any computer can handle this activity. Basically, it's the upconversion of lower resolution video to a higher resolution. After applying some filtering, via an app like DScaler, you can get a significantly better video signal.
The other primary function is to play media. With a broadband connection, it's pretty easy to download rips of movies, CDs and old console games. If you've invested in a large screen and a nice sound system, you might want to use that for this media, meaning you need something connected to your theater that can pull this information from other computers or hold it itself.
Another feature that is becoming more popular is time shifting like a TiVo. The functionality still isn't anywhere near as advanced as a TiVo, but it's adequate for recording TV shows, skipping commercials and pausing live television.
Regards,
Semi
