Well, it connects to a tv with an HDMI cable, then you can wirelessly watch youtube vids, flickr, stream music/videos/pictures from your computer on your itunes, or rent movies from apples apple TV store. Which range from IIRC £1.99 for a SD film to £4.99 for new HD films and anything inbetween. There are some other cool features.
I bought it to use on our downstairs TV, but it didnt really get used.

http://www.apple.com/uk/appletv/