First, I should start off with the prerequisites for the AppleTV itself.
- I have hacked my ATV and installed Perian.
- I also have installed Sapphire to play back the content.
- And lastly, I have installed the USB kernel extensions to allow use of an external hard drive, but this piece is not a necessity.
The second piece I used is Handbrake to actually rip the DVDs.
Most people try to make the choice between AVI or MP4 file formats. There are problems with both of these approaches.