Video can look wonderful on the device. We added a free high-definition feature called Elephants Dream and a couple of movie trailers, all encoded at 720p. The quality was excellent. Some trailers were better quality than others, and at times we saw some nasty jagged lines around the edge of text, although this seemed to be more a fault with way the files had been encoded rather than Apple TV.

We bought a few music videos from the iTunes Store and had no problem streaming them over a wireless network. There was a short pause while Apple TV authorised itself for playback, but everything worked fine. There isn't any high-definition 720p content available yet to buy on iTunes, this is also true of the US, which means that clips bought from the iTunes Store are sub-DVD quality.
It's annoying that you can't watch video you've downloaded from the Internet unless it's in one of the supported QuickTime formats. Apple TV won't appeal to you if you were hoping to watch any WMV, XviD or DivX videos you've downloaded.
You also can't access the full range of trailers found on Apple's site directly from the Apple TV. If you want to access the high-definition trailers, you need a registered copy of QuickTime Pro. This lets you save the trailers to your hard drive, import them into iTunes then sync the files with the device.
If the restrictions annoy you enough there are plenty of Internet sites that will tell you how to 'hack' the hardware to allow playback of more files, but doing so will void your guarantee and you may turn your lovely new Apple TV into a paperweight.
Apple TV sounds great. We hooked it up to a 5.1 surround-sound system via the optical output and were very happy with the quality of the sound. If you're hoping for surround sound from anything purchased from the Store, such as movies or trailers, you'll be disappointed -- Apple TV can't pass a 5.1 signal to the amplifier because of the restriction on the maximum audio bit rate.
Conclusion
If you've been living in the Apple universe for some time, you'll love Apple TV. The integration with iTunes is very slick. Accessing your library is really easy and streaming from five additional computers is a really great idea.
But for the rest of us, the lack of support for popular Web file formats such as DivX, and the lack of Apple TV-friendly content available to buy on iTunes in the UK, is a real killer.
The reality is that there are other media streamers on the market that, although they lack a hard drive and the easy-to-use Apple menus, offer more to people who are hoping to watch their media on TVs around the house. We're thinking of products like Pinnacle's ShowCenter and D-Link's forthcoming DSM-750. You could even use an Xbox 360.
Close, Apple, but no cigar.
Edited by Jason Jenkins
Additional editing by Kate Macefield