No, incorrect, the sidebars are because the AppleTV is meant only for 16:9 TV's.
You have this backwards. When a 4:3 aspect signal (e.g. 480p) is fed to a 16:9 TV, vertical matte bars are added to make the 4:3 frame fit the 16:9 TV, not the other way around.
NTSC being 720x480 means nothing because there is not a set number of horizontal lines in a NTSC set. The use of 720(x480) in the digital world was just because that worked the best.
Think about it like this, the vertical lines are discrete, while horizontal lines are interpolated from the analog signal.
Nope. Original poster was right.
First, let me point out that while CRT displays do not have a "native resolution" to speak of in digital terms, LCD, Plasma, DLP and LCoS do.
Second, it's not the display resolution that's relevant here. It's the resolution of the INPUT SIGNAL from the file, and the OUTPUT SIGNAL from AppleTV that drive this issue.
More specifically, it's the RATIO of the input resolution of the content (H.264, etc.) to the output resolution of the player (AppleTV).
So you've got this 640x480 file playing through AppleTV. AppleTV has, let's say, been configured for 480p in the setup. 480p means the AppleTV output signal is 720x480. The content being fed through AppleTV being smaller than the output resolution means that AppleTV will send a signal that inherently has some vertical matte bars.
Regardless of how a 480p display might distort/stretch/squish the signal to fit its actual native display resolution, the vertical matte bars are IN the output signal sent to the TV just as horizontal matte bars on anamorphic DVD's are added by the DVD player in the output signal sent to a 4:3 TV.