First, the best bit. Jobs showed an iPad (running the forthcoming 4.2 version of iOS) being fired up, pressing a few buttons, and streaming its output to a big screen TV via an Apple TV. This addresses my number one complaint: a friend comes to my house, I show them the Airport Express system, I show them the Remote app so they can use their iPhone to control my iTunes... and they ask me why they can't also stream their own music directly from their device. Sure, this is going to be tough on battery life, but it's not like I'm short of chargers. They want to listen to their own music and if you could see inside my iTunes you'd know why. And now they will be able to!
I was briefly concerned that this jazzy new functionality would not work with my existing Airport Express devices. Fortunately, Apple's sneak peak at iOS 4.2 confirms that an Airport Express will be able to receive a stream from any iOS 4.2 device, so more good news there too.