Several people are missing the point here, including some people who have berated other reviewers for missing the point. Here's the deal:
Apple TV is most like having a video iPod installed permanently in your living room, with some important additions. When you open up iTunes on your computer, it will appear like an iPod does in your 'devices' list. You can then sync or drop videos, music, photos and podcasts onto it. Like an iPod. These will sit on its hard drive, and allow you to access them without your computer being switched on. Like an iPod. You can then watch/listen to/look at these things on your telly (at 720p for video, which is the minimum standard for HDTVs at the moment).
Unlike an iPod, however, it will also stream content over your network dynamically, from up to 5 different computers. So, if your main computer is 'sync'd', you can view stuff on your friends' Macs, or that other PC you have at home (provided these are switched on to allow the streaming to take place). There's also a menu option to view trailers for current cinema releases, also in HD, streamed over the net.
There are *rumoured* features apparently planned with the release of Mac OS X 'Leopard', that will allows Mac users to broadcast their screen wirelessly via their Apple TV onto their HDTV.
Yes, it's quite pricey, but it's also really cool. That's Apple all over, so nobody needs to be surprised. The major catch is that, at present, iTunes Music Store buyers based outside the USA can't buy much in the way of movies, TV shows etc. This turns a 5* product into a 2* fancy paperweight for UK users. If, however, you have found a way to buy US ITMS content, or have other plans to use it to show your own films, then this product's potential is awesome, and for that I still give it full marks.