• PC World
• »Audio/Video

Acknowledging the failure of the Apple TV, Apple CEO Steve Jobs showed attendees of his Macworld Expo keynote address today a new software upgrade to Apple TV that turns the device into a substantially different product.

Apple CEO Steve Jobs said the new and improved Apple TV will ship in about two weeks, coinciding with the release of the software update for existing Apple TV users. Apple has also dropped the price of the Apple TV. The entry-level 40GB model now costs $229, while the 160GB version will retail for $329, a $70 price reduction for either model.

The Apple TV was originally designed to be an accessory for iTunes and a television. And that was "not what people wanted," said Jobs. The upgrade addresses many of the Apple TV's shortcomings, and unlike the iPod touch software update also announced Tuesday, it will be totally free for current owners.

What's Different?

The upgraded Apple TV operates as a standalone device. While it will still synchronize content with your computer, no computer is required to operate it. Once it's connected to your television and your computer network, you can rent movies directly on your widescreen TV, using Apple's new iTunes Movie Rentals feature, navigating using the Apple TV's remote. iTunes Movie Rentals cost $2.99 for "library" titles, $3.99 for new releases.

Apple TV users can also rent movies from iTunes in High Definition (HD) for a dollar more -- $3.99 for library titles, and $4.99 for new releases. The HD movies available from the iTunes Store are encoded in 720 progressive (720p). Many (but not all) of the HD digital movie downloads are encoded in Dolby 5.1 surround sound. Apple counts more than 100 HD titles at launch, with more coming "quickly."

The Apple TV can also retrieve photos from your computer, or Flickr and .Mac. And you can watch videos from YouTube -- more than 50 million, according to Jobs. Anything that you buy or rent through the iTunes Store via the Apple TV -- movies, music, television shows -- will be automatically synched back to your computer, as well.