Users with jailbroken iOS devices can rejoice as XBMC is now available for all iOS jailbroken devices including Apple TV 2nd generation. XBMC plays back videos/pictures/audio files including the popular xvid and mkv files through SMB network sharing. XBMC was first created for the original Xbox but has come along way since then. XBMC is still a work in progress but we have tested divx/xvid, and even 1080P mkv files and the video playback was very good. Unfortunately this only works with jailbroken iOS devices but perhaps one day you may just see XBMC on the AppStore, however with the removal of VLC Media Player for iPad last week, there is little chance. Keep up the good work!
For full instructions please see XBMC.