Full Review - Testing Audio and Video
Sampling Video on the Apple TV *Editor Notes - 3/28/07 - We replaced our test unit with another and did not experience poor HDMI quality on the second unit. It appears to have been an isolated case. If you have experienced heat or HDMI quality issues, please post in our forums for others to read.
When testing my Apple TV video quality, I found that component rendered better quality than HDMI. HDMI seemed to have a lot of ghosting of images, whereas component seemed perfectly clean and crisp. This was on a Samsung 26-inch LCD television (model LN-S2651D). Other users may have different results depending on the type of cables used, model of HDTV, etc.
In my iTunes library, I have several recent episodes of Lost, some video podcasts, a few new 16:9 movies and a couple older TV shows that were obviously converted from 4:3 film to 4:3 digital for sale on the iTunes store. I was curious about whether the Apple TV would enhance the 4:3 TV shows at all, or if they would continue to look as old as they were.
Of course, the newer 16:9 digital films looked great. They played with the same quality on the Apple TV as on my MacBook Pro. Home-library movies converted from DVD to MPEG-4 (using h.264 and 1200kbps bitrate) played very nicely - near DVD quality. While there were some minor artifacts common to converted video, there was nothing that caught my eye as flawed or annoying. Also, I was watching video from only 18 inches away - up close and intentionally looking for flaws. Had I been sitting on a couch in my living room and 6-10 feet away from the screen, I would not have been able to differentiate the MPEG-4 file from DVD. Whether synced or streamed, my 16:9 movies looked amazing. I can really see that this is where the Apple TV will shine.
iTunes TV shows, however, seemed to struggle a little on the Samsung display. Lost, in particular, was disappointing especially because it is a currently-running show and, while the videos are 4:3, one would expect near perfection on the Apple TV. What I experienced, however, was messy, lossy, pixellated video. It looked like I had converted a VHS tape to WMV, then converted to AVI, then converted to MPEG-4. Choppy, blocky and washed-out are all fair descriptions for the Lost videos I tested. 
Lost on the Apple TV
The same shows, when captured in HD format using a DVR and then converted to Apple TV format, played beautifully.
Until Apple manages to convert all ITMS content to high-def, watching some TV shows on the Apple TV will be a bit of a crap shoot. Some shows will look gorgeous, and some shows will look sickly.
iTunes Music on Apple TV
One feature of the Apple TV that I really dig is the ability to play iTunes music on my TV. I can scroll through my music library using the beautiful Apple TV interface. When I select a song or playlist I want to listen to, Apple TV instantly begins playing. The song's progress appears on the TV screen, along with a stunning image of the album art, complete with the slick reflection under the image. The album art moves around on the screen from left to right making it a pleasant sight. The Apple remote controls the progress of the song just like it would be controlled in Front Row or on an iPod. I can skip forward or back, pause, stop and even jump the the next track. Using the iTunes music playback feature seems like it'd be great for dinner parties or holiday mixers. Maybe that makes me sound like a total square, but it seems like a great use for the Apple TV music function. 
Jack Johnson on the Apple TV
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by Stacey on May 5, 2008:
“We loved Apple TV so much, we now have two... one for each floor of the house. The larger size is a must, especially with the movie download capability, from the couch. That said, here's what I would suggest to make users like us even happier: - allow...” More...