Digital video has been around for a while too, but it has always been limited (and somewhat taboo) due to the complications involved in either converting a DVD to a digital file, or downloading that video illegally from the Internet.
Just recently a push has been made to legitimize digital video content with services such as Amazon Video on Demand, iTunes Store, and Netflix streaming. There is also Digital Copy, which is a digital copy of a movie that comes with several new DVD and Blu-Ray movies. Unfortunately, all of these options use DRM and tie you to using a specific computer, or a specific program to play it. The Amazon and Netflix services mentioned can easily be streamed to any computer that you are logged into their service with, but what about if you want to copy that movie to your laptop or iPod to watch while riding a subway to work, or when you are traveling and don't have Internet access? And if you don't have a device that is compatible with the service then you are pretty much out of luck.
That's a huge problem, and is what is holding back the adoption of this technology from the mainstream public. And Blu-Ray is in a weird limbo too because it is sandwiched in between the established DVD technology (which everybody has), and this new digital media technology.
Digital Copy was also poorly executed. I have several movies that came with Digital Copy versions of the movie, but I haven't activated a single of them because you have to choose at the time of activation whether you want a version that will play in iTunes or if you want a version that will play in Windows Media Player. You can't have both, and you only get one activation. How do I know what computer or devices I want to use that file on in the future. If you have an iPod/iPhone, only the iTunes version will work. But what if you have a Zune HD, or any other device? Digital Copy will never take off as long as it contains DRM and you are limited as to what you can use to play it.
I want to watch movies/videos on my television!
The other challenge has always been how to get the movie/video files to play on your living room television.
Media Center PCs have been around for several years. I have built a few myself, and they work relatively well, and are usually the most diversified in what they will play on your TV. But they are generally high maintenance. You've got to keep up with Windows updates, driver updates, software updates, and antivirus protection. You pretty much have to be an "IT guy" with lots of time and patience in order to even consider this option. And who wants a huge ugly PC sitting in their living room with the loud fan buzzing away? There are some more attractive Media Center PC options available today such as the Dell Inspiron Zino HD and the Apple Mac Mini, both of which have a small footprint.
AppleTV was the first device which made it simple to stream content to your television that was purchased or rented from the iTunes Store. This works great for iTunes content, and is the only device which can play iTunes video on the TV. It has a beautiful simple to use interface. But that limitation of only playing iTunes content is what eventually caused me to get rid of mine.
Xbox 360 and Playstation 3 will stream content from your PC, but both are very finicky about what file formats they support. And neither will play DRM protected audio or video, unless purchased from their own respective online store.
I recently purchased a WDTV Live for a couple of family members. The user interface is nothing to write home about, but it is completely silent and it plays a wide variety of video file types. It has Pandora, Flickr, and Live 365 built into the box. And you can use a program such as PlayOn to stream a plethora of other content to the box, such as Hulu and Netflix. If you need/want something right now, I highly recommend WDTV Live.
However, Boxee has recently announced that they will be releasing the Boxee Box. Speculation is that it will be available Q2 2010, but no official release date has been announced. It has an extremely polished and intuitive interface and connects you to an extensive amount of online content (Hulu, Netflix, etc.) natively without the need for additional software to be run on a computer. And just like the WDTV Live, Boxee has long been known to play a wide variety of video formats. I'm not too fond of the sunken cube look, but the Boxee Box uses an RF remote. This means that you can hide the box in a cabinet because the remote control does not require a direct line of sight to work. I think the Boxee Box is going to change how a lot of people watch their video content. Watch out for this one!
Here's the announcement video for the Boxee Box.