If you have an AppleTV...

Yes and no. There are some hacks that allow you to play other formats (divx, avi, wmv, etc). Otherwise, you’ll have to use something like iSquint in order to convert your movies to Apple TV’s format.

The good news is that iSquint works perfectly if you don’t feel like hacking/modding your Apple TV, and it’s free! In order to get HD movies though, I think Visual Hub is the way to go. It’s basically the pro version of iSquint. And even then it’s still only 720p

I use 4media Apple TV Video Converter and it works great for me

http://www.mp4converter.net/video-converter-mac.html

Yes and this is where I get most of my movies from. Get your movies, (usually in DivX format) and use VisualHub or iSquint to convert them into mp4 files. Make sure that your original file is good quality so that it will look good on your TV. After you have your movie in mp4, run it through MetaX which will put all the descriptions and information about the movie into the actual file and then import them into iTunes for you.

Alternatively you can use HandBrake to rip DVDs and then put them through MetaX to get the best quality. They look better than the movies from iTunes in my opinion, although the file sizes can be large when ripping from DVD on AppleTV settings. I’ve put about 60 movies in my library using these methods and it works wonderfully for me.