Apple has said that Apple TV is just a hobby for them, reiterating the joke at the company's September update. To some, Apple TV stole the show, wowing with its new tiny dimensions, and a price that's difficult to ignore. We got our eyes on the new box at the launch event and here is what we thought.

As you'd expect, Apple has done a great job on designing the new Apple TV. The small black box measures just 2.29cm high, by 9.91cm square. The market is flooded with similar TV streamers, but so many are glossy black plastic that you'll want to hide from view; Apple TV by contrast looks every bit as good as the rest of the Apple range.

The black - rather than white - design means it will also fit in well with your existing home cinema kit, which is predominantly black, unless you are a massive Loewe fan. The small size, however, might see it getting lost amongst the rest of your kit, but be careful not to overlook this mighty device.

Around the back the connections are simple: power, HDMI, optical audio and Ethernet. Internally you also get Wi-Fi a/b/g/n so both connection routes to your network are covered, which is to credit to Apple as not all manufacturers will give you both. (A Micro-USB connection hides under the HDMI, but is indicated as for service and support only.)

The provision of an optical audio output will please those with older AV equipment who can't cater for the HDMI, although those with modern kit will be able to use the HDMI for video and audio, which will be the case for those who just connect it straight up to a TV. Reading the specs, it says you'll need to provide your own HDMI cable, which seems a little miserly.

Bundled in the box is one of Apple's typically skinny IR remotes, which offers basic navigation functions but not direct access to particular features per se, only the main menu. It is lovingly crafted from aluminium, but is the sort of size that we'd expect to lose down the side of the sofa and there are no controls on the Apple TV itself. However, there is also an Apple TV remote app you can download, so you may choose never to use the supplied remote and because it works over Wi-Fi, you won't need line of sight either.

The small size has been achieved because there is no internal storage. This positions Apple TV as a streamer as it simply provides the feed for your TV to consume. In this it is far from unique, but it does it the Apple way. And that means the interface is considered and slick, rather than messy and basic which is so often the case. 

The menu breaks down into Movies, TV Shows, Internet, Computers and Settings. The Movies and TV Shows essentially pulls content from the iTunes Store. Of course this is where Apple will be able to make some money, because you'll be paying for your content, renting movies and TV shows. HD films will start at £3.49 and SD films will be from £2.49, with prices varying - new releases will be more.

We saw Apple TV streaming live video content in 720p HD and it seemed to be fast enough to get going, but we'll reserve final judgement until we get it into our own homes to test it out. 

As it is connected to the Internet, you also get access to online content, with YouTube, Flickr and MobileMe being highlighted. Steve Jobs also confirmed that it would stream YouTube HD, if you’re a stickler for quality, but we're guessing again that the 1080 variety won't be supported. US customers will get access to the Netflix movie streaming service (although you'll need an existing account) and at the moment there is no provision for this service in the UK - a tie-up with Lovefilm would be the most likely route if we look at how they have done deals with companies like Sony.

UK users will most likely be baying for BBC iPlayer (something the afore-mentioned Sony has done an excellent job with, integrating on some of its connected home cinema devices). Apple TV will certainly handle it, but whether it would integrate a service that insisted on sticking to its own layout, and only in one region, remains to be seen.

Offline we see the other side of Apple TV, as a straightforward media streamer. The great thing is the level of consistency across the menu system presented. We'll have to have another dig around in it when we get it in for review, but at first glance, Apple has done a good job at presenting your content, which can be streamed from a PC or Mac. 

When it comes to streaming from your local network, Apple states that you'll need iTunes 10 to do this. How Apple TV will handle NAS drives, or collections that you keep on a NAS drive but access through iTunes, is something we will look at when we come to a review.

One thing we've said before is that when it comes to network streaming, the device is only as good as the codecs it supports. Basically we want everything to be supported (and continually updated) so that there is never a problem accessing the content you have on your hard drive. Yes, you'll have no problems with content you buy from Apple through iTunes, but with so many formats, containers and codecs from your mobile phone, camera video, camcorder, pocket camcorder, not to mention downloads, this is one area where Apple TV might come unstuck.

Formats that get a name check are those common Apple formats, H.264 M4V, MPEG4, MOV, and M-JPEG AVI. Audio formats cover HE-AAC, AAC (including anything with DRM that you bought from iTunes and never updated), MP3 (including VBR), Audible 2,3,4, Apple Lossless, AIFF and WAV. Dolby Digital 5.1 is naturally supported as pass-through to your home cinema system. JPEG, GIF and TIFF images files are also supported.

Whilst these formats cover most bases, there will always be those that want wider support, and DivX and DivX HD/MKV seems like an obvious omission. It's worth noting too, that Apple is only supporting resolutions up to 1280 x 720.

This resolution support is fine for the streaming services - it's pretty much what you get from broadcast HD content in the UK, and 720p streaming works well enough with your average broadband connection. But it will be somewhat limiting for those that already have 1080p content. It will also be a bane for those with a Full HD camcorder or DSLR who want to easily show off their video stock. Steve Jobs said that people don't want a computer under their TV, but at least that gives you all the options you'll ever want.

Whether Apple will update this support remains to be seen, but we suspect it will only change if they have supporting products. If the iPhone 5 was to come along shooting Full HD video, then perhaps we'd see a shift - whether the A4 chip (the same as the iPad and iPhone) will handle it is a different question.

The other neat feature that Apple TV will offer is AirPlay, which will be updated on all iOS 4 devices before the end of the year, so that covers the iPhone 4, iPod touch (old and new) and the iPad. AirPlay will let you stream content from your mobile device to your TV, so if you have a video you shot on your new iPod touch and want to show it off on your TV, Apple TV will let you do it. You'll also be able to watch half a movie on your iPad in bed, get up and transfer it to your TV, which is a useful addition.