So last night I rented my first film from the xBox Live Marketplace; it was Ratatouille, and we rented it because we don't have a Blu-Ray player and renting it on the xBox is the only other way to enjoy the film in high definition. The cost was about $6, which is only a dollar more than what Blockbuster charges for a rental. The quality was 720p picture, 5.1 surround sound, and it looked and sounded great. I was more impressed with the sound than the picture, but while the picture was a little soft on details compared to a 1080p HD DVD, there were no compression artifacts or anything of that nature. The movie allowed us to begin playing just as soon as enough was downloaded that it could play without interruption (19%). The file size was 5GB.
I would expect Apple to at least match Microsoft in terms of picture and sound quality; the only real hurdle with the xBox is that you can't purchase directly with money; you have to first purchase "points", which can then be put toward marketplace purchases. That and the mediocre movie selection is really the only downside to the xBox's rental system. If Apple wants their service to become people's default means of watching movies, the selection needs to be vast and the quality needs to be 720p with 5.1 surround sound. Otherwise, it's just going to be movie rentals for iPod users, and that's not very exciting.
Originally Posted by bluedalmatian
...and the picture quality is no different to VHS, despite all the signing and dancing adverts when they first came out.
There's either something seriously wrong with your eyes, the way you're hooking up your DVD player, your television, or all of the above. The quality difference between VHS and DVD is night and day, so long as your television is bigger than 19" and you're hooking up your DVD player properly (i.e. not with RCA, S-Video, or an RF connector). And as others have said, every time you play a VHS tape the quality degrades; hell, if it's just sitting in a box the quality is degrading.