I can only assume that an Apple TV software update is on the horizon. But in the meantime, here's the skinny about how Apple's set-top box plays with the new HD content announced for the iTunes store and with iTunes 8:
The HD content on the iTunes store is all 720p, which is good, because the Apple TV can't play video at resolutions higher than 720p. I tested a few HD TV shows--downloaded on my Mac via iTunes 8--on my Apple TV, and the shows looked great. When I was streaming them across my home network, the video stuttered briefly right as I began playing, then settled down.
Interestingly, though purchasing an HD TV show from iTunes results in the downloading of two files--one "iPod version" (480 pixels high) and one HD version (720 pixels high), the Apple TV only seems to display one version in its menus. (Unless my eyes deceive me, it's the HD version.)
What the Apple TV can't do, right now, is purchase HD TV shows itself. When I browse the iTunes store on the Apple TV, I can only see the US$1.99 standard-definition versions of TV shows, even though there are also $2.99 HD versions available.
The Genius command is also not available on the Apple TV right now, though I wouldn't be surprised if it gets added in the future. In the meantime, though, there's a workaround: if you create a Genius playlist on your Mac and press the Save button, it will appear on the Apple TV as a Smart Playlist.
This story, "Apple TV, ITunes 8 and HD" was originally published by Macworld.