Yeah that includes the hard drive. Once you have a 24/7 dlna/upnp server u can play not only from TV and other computers as well. It is not a game changing device but there is a value in it. i rest my case.
It's a packaged sheevaplug http://www.marvell.com/products/embedded_processors/develope...
You can do the same thing using fuppes, an updated version of uShare. Fuppes also supports transcoding, uses a sqlite backend and can rescan watch folders to rebuild the database pretty quickly (either from cli or web interface, without restarting). I use it to stream to an xbox360 and it works perfectly. Haven't tried transcoding though since all my video is compatible.