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(Pocket-lint) - For many, including Apple, Apple TV is seen as a hobby. But has the latest version, launched in October 2010, changed all that? We've been playing with the new Apple TV to find out.

The biggest physical difference between the new Apple TV and the previous iteration is the size. Apple TV has shrunk massively; no longer is it a big box the size of the Mac mini or Apple's TimeCapsule. It measures 22.9 x 99.1 x 99.1mm, is matte black and very minimalist in its design. 

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With zero buttons and only a single, white status light on the front, everything is controlled via the included aluminium remote. Around the back are the ports needed to get you connected to your TV. That means you get power in, HDMI out, optical audio out, Ethernet and a Micro-USB socket (for updates and support). You can connect your Apple TV to your home internet connection via wireless 802.11b/g/n.

In the box you'll get the Apple TV, the remote, a power lead and nothing else. That's right, you've got to go and buy the HDMI cable. It's a cost cutting move that considering the price of HDMI cables is a bit cheap - still you can pick them up at Amazon for under a fiver so don't worry about spending another £100 for the promise of the "best" you can buy.

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Like Apple's MacBook and MacBook Pro line, the remote control is sleek, thin and tall with black buttons and adorned in brushed metal. You get the iconic Apple circle (it's not a scroll wheel), a menu button and a play/pause button to get you going. Of course, if you've got an iPad, iPod touch or iPhone, you'll be putting the remote in a drawer somewhere to gather dust, as you can use any of the iOS 4-friendly devices to control it all via an app.

Downloadable for free via the App Store, the Apple Remote app gives you all the power of the metal remote, with the added bonus of an on-screen keyboard for typing in search requests, as well as gesture controls to actually control what's happening on the screen. The remote app is very easy to use and additionally means that you don't have to worry about a line of sight for the IR remote. That means you can bury the Apple TV out of the way at the back of your collection of set top boxes, rather than having it front and centre. 

As for the internals of the Apple TV, it runs Apple's A4 processor (probably the same one found in the Apple iPad), and comes with zero storage space. If you are brave enough to rip open the box to peer inside you will find an 8GB flash drive, but this is solely for buffering and the operating system.

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The Apple TV 2 (or just Apple TV if you are Apple) is all about streaming. Streaming from the Internet, streaming from your computer, or streaming from the iTunes store, without the need of playing movies, TV shows, podcasts, or photos from an internal drive. Put that idea into practice and it's the reason Apple has been able to make the device so small.

Once out of the box, all that is left to do is plug in and turn your television on. 5 seconds later and the system fires up ready to roll. Set-up is incredibly simple. All you have to do is enter your Apple ID (the one you use to buy stuff in iTunes) and it does the rest. If you own the original Apple TV then the interface hasn't changed, whilst your location in the world and what iTunes store your account is associated with will determine the options presented to you. In the UK that means Movies, Internet, Computers and Settings, while US owners of the Apple TV 2nd gen will get TV shows as well. 

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Movies, as you would expect, gives you access to all the latest movies Apple has to offer. You can't buy them, only rent them for 48 hours, and prices are £4.49 for HD rentals in the UK and £2.49 for SD quality. After that 48 hours you get a countdown timer on the home screen, the ability to play the movie is revoked and you're back to having no content. Something that we've already been caught out on.

Movies are presented in different ways, with the main movies page offering you Top Movies, New Releases, Popular films, and the ability to search via Genre (Action & Adventure, Romance, Sci-Fi and so on). There is a good selection, but not one that features every movie ever released. At the time of writing most of the latest releases are featured, which is likely to be more than enough for most people.

There is also a stack of trailers to watch for films hitting the cinema, and while this will entertain you, it is really only one for when you are desperately bored. Renting movies is incredibly easy, you've already linked your Apple ID account to the system remember and it is just a case of waiting for the film to download. That depends on your broadband connection, but on our 8Mb line we were able to start watching a HD version of Kick Ass in about 5 minutes.

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The TV Shows option is currently only available to US iTunes customers. It's a killer element of the Apple TV offering, allowing you to watch TV shows from ABC, ABC Family, ABC News, BBC America, BBC Earth , Disney Channel, Disney XD and Fox. Notably HBO isn't present, so you won't get shows like the Wire, The Sopranos, or Sex and the City. You do get Grey's Anatomy, Boston Legal, Desperate Housewives, Private Practice, Top Gear, Skins, Robin Hood, Spooks (called MI-5 in the US), and Little Britain. Fox gives you Glee, Lie to Me, 23, Bones and Family Guy to name a few. At 99 cents it's a steal.

As for quality, we tested it out on a 40-inch Samsung TV and an LG 47-inch television (the LX9900). In both cases the output was broadcast quality and certainly on par with Sky's 720p HD. While purists will complain it's not 1080p (the Boxee Box will, most likely, be for you) for your average TV watcher, 720p is enough here. It also means that you won't be waiting forever for the movie to download.

The internet option isn't what you might expect: you can't turn your TV into a computer at the touch of a button. It's a strange omission, certainly considering that Apple's main rivals, the Google TV-powered Logitech Revue (available in the US) and the Boxee Box, both have browsers built in. In the UK, Internet means YouTube, Podcasts, MobileMe, Flickr and Radio, if you are in the US Netflix video rentals are also included, being streamed directly to your TV.

YouTube lets you view the millions of YouTube videos on the website and breaks the content down into different areas such as Most Viewed - yes you can watch "Charlie bit my finger", again! - whilst you can search the site and view your own history. You can log in so you can see your own videos that you've uploaded yourself. Podcasts is self explanatory, while MobileMe lets you access your MobileMe shared drive.

Flickr allows you to view public images from the photo sharing service, however without a log in option you can only view images that are publicly available. If your photos are private you aren't going to be able to see them here. It's a blow if that's what you had planned, and an omission - like the lack of a browser - that we can't fathom.

Radio taps into iTunes Internet Radio selections, giving you access to thousands of radio stations from around the world. Computers is about streaming content from your Computer to your Apple TV and therefore expanding the content opportunities.

Introducing yet another Achilles Heel into the mix, you will have to have a computer running iTunes in your house which is physically turned on and connected to the network. While other streaming boxes support NAS drives (a hard drive connected to your network) Apple TV isn't having any of it, instead insisting that you must have iTunes up and running for the streaming to work.

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If you're okay with that, then you get full access to your iTunes catalogue; music, movies, TV shows, podcasts, iTunes U, and Photos. To get it to work you must have iTunes Home Sharing turned on in both the Apple TV and your iTunes software, but it is a one click, one time only setup so the implementation isn't too taxing.

AirPlay, a new technology introduced by Apple for this version of the Apple TV, is now included and this lets you stream content from your iTunes catalogue to the Apple TV. Looking at the bigger picture it also lets you stream content from your iTunes catalogue to other devices, but for the purpose of Apple TV that's irrelevant here.

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Where it does make a difference, however, is that sharing content between the two is instant. Once you've paired the two together, you have full access to anything within the iTunes Library and the Apple TV can support multiple iTunes libraries to stream from. Photos don't have to be iPhoto, enabling you to stream from any folder on your computer or NAS drive (you see, there is network support in there, kind of).

Settings lets you manage the settings of the box, and it's here you can determine your audio and visual settings of the Apple TV. One nice feature is turning on HD or not. If you opt for HD on, then that's all you see, likewise for SD movie and TV shows. Yes it's HD, but only 720p. And yes it's Dolby 5.1, but only if the movie offers it.

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AirPlay also means that in the future (a feature that Apple lists as coming soon) you'll be able to watch a movie, TV show, or listen to music on your iOS 4 device, allowing you to carry on watching it via the Apple TV when you get home. It's likely to be clever stuff, but at the time of writing we aren't able to test it, so we'll have to take Apple's word on it.

To recap

Compared to the Boxee Box and Logitech's Revue, Apple TV is still a hobby

Writing by Stuart Miles.