The first hack that was made available was hardware and required to open the ATV to remove the hard drive. I used to like opening my computers to play with their guts, but lately the innards of electronic devices have become so compact and complicated that I don't want to take that risk anymore — without mentioning that I would rather not void the ATV warranty. After a while someone came up with the clever concept of the “patchstick”, a USB drive that contains the necessary code to enable SSH on the ATV and install plugins & scripts giving the ATV extra functionality. But putting the patchstick together was still a complicated procedure and using it entailed some risks so I decided to wait until I could learn more about it or until someone would come up with a simpler procedure. Later, a pre-installed USB drive was offered on the market, but the company selling it was sued and the product withdrawn. Finally, someone came up with atvusb-creator, an easy-to-use patchstick (well “easy” is all relative since I had a hell lots of trouble getting the app to work on my iMac—since then they released a new version of the app that works better—and I had to try several USB drives before finding one that would work properly on the ATV (a Lexar USB2 SDHC card reader with a cheap Taiwanese Adata 1 Gb card), but after several hours of work I finally succeeded to hack the ATV and can now access it via FTP). It is mostly designed to install Boxee (a media center also working as a social network, but it is still in alpha testing, on invitation only, and I didn't manage to get an invite yet), but it also installs XBMC !
Once the ATV is SSH enabled you can install all sort of scripts or plugins (see AwkwardTV for details), but XBMC is really all I need. It is very similar to the XBMC that I am running on my old Xbox, except that it looks nicer and performs better. With XBMC the ATV can access files on my network drive and it plays about any type of video files (I don't have problems anymore with the Matroska file format or Hi-Def video). That's really cool.
Now, the next step will be to purchase an HDTV... Before Christmas. But that's another story.