I've looked into it a bit. It's basically a media PC for your TV. You can rent movies, shows, watch you tube videos, and look at flickr pictures.
Pretty much everything you can do with a laptop and a HDMI cord too, except it's much easier to use.
One big advantage for Apple TV is that one computer in your home can have its iTunes library synced to it. Once synced, the computer which has your Itunes library won't have to be turned on to watch Apple TV (with the same libraryof songs).
Here's the link to Apple's page for it
Apple - Apple TV