Cringely is convinced there's a deadly secret in the HDD in the Apple TV. He has a nice, complicated, techno-p2p theory about what they're up to.
I'm pretty sure he's wrong. Part of it is that Apple doesn't generally build those kind of cutting edge solutions. But more to the point, there's a simpler explanation.
Apple did a bunch of experiments and discovered that most networks can't really really reliably serve up video, especially if you get to HD content. While he's right that video at 1.5Mbps should be able to stream across wifi (in theory 11 or 40+ Mbps throughput), in practice there are problems.
The Mbps rating on Wifi is an average, under ideal circumstances. It drops dramatically when you are making popcorn in the microwave. Ditto when the computer or the Apple TV isn't in the same room as the router. There are many similar problems. Plus, not all users want to keep their computer on 24/7 so they can listen to music!
So Apple TV has a nice feature - you can sync music and videos to the 40GB HDD and not worry about any of the above. the videos trickle over as you get them, and they're ready on the local HDD when you want them. Nice.
This has a single main downside - cost. The $299 apple TV is a tough sell for most users at that price, and the HDD is a big chunk of the cost of goods. I think this will be a major limiting factor on it's success, but was probably the right choice for making the solution go mainstream.