aTV Flash is a set of programs that add features to your Apple TV. It adds SSH/FTP access, allows you to use an external hard drive for additional storage, adds Boxee support, and much more. One of the big additions is the ability to watch AVI, MP4, MOV, WMV, and DVD (VIDEO_TS) files. You can even install Firefox and use the AppleTV as a web browser.
I've actually owned the aTV Flash software for over a year but had never gotten around to using it, because after each Apple TV update I'd have to wait for the software to be updated again. aTV Flash updates come out fairly regularly, but it was just the hassle of the process that made me averse to doing it. Now that Apple has declared the product to be essentially End Of Life, I figured there was no better time to start.
Installing aTV Flash couldn't be any simpler. You simply download the installer (available for Mac or Windows), and it installs the aTV Flash software onto a USB flash drive. Unplug your Apple TV, plug in the aTV Flash formatted flash drive, reboot the Apple TV, and wait for it to finish. The whole process took only a few minutes. After being updated, the Apple TV interface looks mostly the same, except there are some new menu options to choose from.
The aTV Flash software sells for $50 and includes a year of updates. They are planning to keep developing additional features for the first generation Apple TV units, including Last.fm support. When I first looked into this about a year ago, there were apparently ways to do much of what aTV Flash offers by yourself if you had the time and inclination to find the instructions on a variety of websites. Personally I found it well worth it to pay for an easy way, but if you are looking to save some money, you might take a look via Google to see what's available; it may have gotten easier since I last checked.