The Apple TV syncs off of the iMac (it makes the most sense to use the computer that is always at home), but you can stream content off of any computer via iTunes.
Music
My entire music collection has been synced to it and once in a while I play classical music just in case it really does make the kids smarter. Otherwise I haven't played music on it too often, but this feature will come in handy for parties. I'll have to manually copy new music from my laptop to the iMac for it to sync, but that's okay since the iMac's iTunes library will be the "family" media library and include more kids music.Pictures
I'm also syncing my entire iPhoto library to it. We haven't found much use for the photo browsing feature yet because it's so much easier to navigate pictures with a computer, but the Apple TV's screen saver shows random pictures from your library float by and we often find ourselves just watching it. I wrote a simple rsync command to sync my laptop's photo library with the iMac.
TV Shows
I didn't think we'd ever really use this feature, but a number of my friends had mentioned that they liked the new Terminator show, which was now up to its fifth episode. So I bought the pilot episode through Apple TV and are able to catch up at $1.99 an episode. I'm not tempted to cut off the cable yet because none of iTunes' TV content is in HD and there's no way to watch live sporting events or news (I watch a lot of CNN during election years).
Movies
One night when Kyla was sick Becky wanted to watch a movie with her. She was looking at the On Demand selection but nothing was jumping out at her. I mentioned that she could get one through iTunes (we didn't have Apple TV at the time, but I hooked Becky's laptop up to the TV), and that night Kyla saw The Little Mermaid for the first time. We've now bought several Disney movies this way.
Getting Rid of Disks
I've been playing with Handbreak a lot, learning to fiddle with the quality settings. This isn't a simple process like ripping CDs with iTunes, but I'm getting the hang of it. Once they're there, accessing movies via Apple TV is much faster and easier than having to deal with disks.
Movie Rentals
I love browsing the movie rentals on my Apple TV and have been really tempted a couple of times to buy one, but then I remember that I have kids that don't always sleep well and that it is highly unlikely that I'll finish the movie in the alloted 24 hours. When Becky and I watch movies we typically spread them over two or three nights, and with Netflix or Blockbuster Online, you can do that. If Apple extended this limit to 72 hours, I'd cancel my Blockbuster subscription tomorrow. I'm not in the market for a Blu ray player (I flirted with the idea of buying an HD DVD player a couple months ago, thank goodness I decided against it), I would like to just skip the whole disk thing and go straight to downloads.
I know I'm not alone with this complaint, so I'm guessing Apple will figure this one out eventually (the first step might be a 99 cent time limit extension, but that will get costly).
Home Movies
My other big complaint is that Apple TV does not sync the iMovie Events library. I really would like to see my home movies sync to the TV automatically, without having to include them in the iTunes library (which would be silly since I'd have to have space for two copies of every movie). This feature may not be highly demanded yet since iMovie '08 first introduced the whole movie library concept, but its a gap that should be filled soon.
Future?
I believe that Apple TV may have a bright future if Apple plays it's cards right. Last night Becky was telling my mother how much she liked it, which is a good sign. Becky is a good barometer for a technology's broader appeal since she is young, bright, and moderately tech-savvy, but has no patience anything that doesn't "just work." Some examples: she was very happy with TiVo, her iPod nano, likes my iPhone and plans to use it once I upgrade after the 3G model comes out, and likes Mac OS X despite having been very comfortable with Windows; however she couldn't stand Linux no matter how hard I tried to use it as our primary OS back in 2001.
My advice to Apple would be to get a bigger selection of movies available for rent (especially those in HD) and then start airing commercials so that more people find out that this thing exists. It is less expensive than a Blu ray player and has many more features.

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