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i know its not an actual tv. but what exactly is at and what does it do?

an apple tv hooks up to your actual tv and it allows you to wirelessly connect to the itunes store as well as store itunes store purchases
its functions
1)you can rent movies, tv shows, etc. right from your tv using apple tv
2) you can transfer all your itunes purchases to the apple tv to play on your actual tv
3) you can watch youtube videos and podcasts right through your apple tv

for more info visit
http://www.apple.com/appletv/