Michael Gartenberg has a good analysis on the Xbox HD TV and Movie service announced earlier today:

Net? A good move for Microsoft and XBox to add functionality without compromising anything related to game play. Don't be fooled by the limited content (although current content maps to the gamer demographic well). Like iTunes, we'll see more stuff coming to Live pretty quickly.

Engadget has details here. VC-1 will be the codec used for delivery of HD content.  The HD trailers were just an appetizer. IPTV just became a mainstream reality overnight.