The new Apple TV rental model isn't really price-competitive - Hulu's free for current-run TV, and Netflix is cheaper for older (not current season) TV or for movies. At least the old model let you keep the file to re-watch.
We've dropped our cable. We use a combination of streaming Netflix, Hulu, and Redbox for all of our entertainment needs. I just don't see where Apple TV provides any real advantage. Especially with XBox promising Hulu support early next year.
To me the question is whether they've let all these competing services catch on too much before throwing their hat back in. Virtually everyone who knows what AppleTV is/was is already aware of Hulu and Netflix. So they've got to do a really good job of improving the experience with these channels, or alternately target less tech-savvy people who aren't aware of these alternatives.
In my experience, anyone who wasn't raised with game consoles does not want to deal with them when trying to watch movies. My father would sooner drop a couple hundred bucks on a redundant DVD player than have to learn what "sign in to xbox live" means, or remember that the green button means go and the red one means go back.
Apple has global reach and will be getting in early in a lot of countries.
http://blog.netflix.com/2010/05/now-streaming-in-hd-on-pc-an...
However, it might be a GREAT deal for people who don't watch a lot of TV.