The Apple TV may just be a "hobby" in Apple's eyes, but it's been quietly improving over the last year.
The current iteration of the product was released in the fall of 2010, and at that time was derided for only being able to stream a few Fox and ABC TV shows. Since then, Apple has issued a variety of software and service updates that have made a big difference.
Now, the entire iTunes video catalog is available for streaming. Apple has also tightly integrated Rotten Tomatoes movie ratings, and iTunes purchases are saved in the cloud, so you can always restream them--or download them to iOS devices (iPhone, iPad, and iPod Touch) and computers running iTunes. And with the advent of iOS 5, the Apple TV's gotten a few new features, such as AirPlay mirroring and Photo Stream support. All of that is in addition to a wider range of third-party content "channels," including Netflix, YouTube, Vimeo, a good sports lineup (NHL, NBA, MLB.TV), Flickr photos, the Wall Street Journal, and Internet radio and podcasts--some (but not all) of which require paid subscriptions.
The Apple TV's main competition is Roku's line of streaming boxes, and it's a close call. For the budget buyer, it seems likely that the upcoming Roku LT will offer the best overall value, as long as you don't need to stream music or videos from your own PC. At the $100 level, the Roku 2 XS offers more streaming-media options (Amazon Instant, Hulu Plus, HBO GO, Pandora, and MOG), but its user interface isn't nearly as nice as the Apple TV's and it lacks Apple-friendly features like AirPlay.
The Roku 2 XS remains our Editors' Choice for its superior lineup of streaming-media services, but the Apple TV is a better choice if you already own other Apple products or if you prefer its more refined user interface.