I hear this questions a lot now a days! What is XBMC Apple TV? A better question might be, What is XBMC for Apple TV. XBMC is an award winning software that can be installed on many different types of devices. It is an open source media player and entertainment hub for digital media. It is, in my opinion and many others, the best software for all your digital media.
Apple TV quickly became a well supported device to install XBMC onto. Apple does not support unsigned 3rd party software so the only way to install this software is with a jailbreak. Currently there is an Apple TV Jailbreak and an Apple TV 2 Jailbreak. The Apple TV 3 is not currently jailbroken and therefore cannot run XBMC. This has been slowly driving up the price of the Apple TV 2 and now is at 3-4 times the original price.
If you enjoy digital media, I would recommend looking into XBMC and learning more about the software and what it is capable of.
Since the Jailbroken Apple TV 2 is now at such a high price, people are starting to look at alternatives. After trying out several myself and realizing there were not any good alternatives, I began installing custom software. Now with the finishing touches complete the Taffy Media Center is the best alternative to a jailbroken Apple TV 2 if not better in many ways.