I use the Pi as the processor/display generator for a RasPlex system. While IMHO it isn't really fast enough for all 1080 video, it's plenty good enough for 720. That makes it a cheap alternative for things like our bedrood system. Although the RasPlex software is still in development, it works well enough for the purpose at hand, and better than some supposedly mature software. It's downloadable at
http://rasplex.com/
The Pi is a nice little building block when you need a small, relatively inexpensive building block. It's been criticised for requiring an extermal power supply, keyboard, etc etc. But that seems to me to be a part of the building block idea. I wouldn't really want something that committed me to too many details! And, as someone has pointed out, you don't really need a permanent display, keyboard, or mouse, since it can be controlled over the network. I think it would make a nice router, if you wanted to really customize things.