Ok, some people here are being seriously narrow minded. It doesn't matter what processor is in the thing at all as long as it does the job. A slow G4 can run Frontrow with ease which is basically what this machine is for. There won't be extra software, games, hell there won't even be a "About This Mac" option.
For the idiots going on about it being a Pentium and how that's aweful, learn your facts. The Pentium M is what the Core Duo and the Core 2 Duo chips are based on. The Pentium M is the *reason* that Intel completely dropped the P4 architecture. It was meant as a side project and turned into the leading processor technology. A Core Solo is basically a Pentium M + Cache + SSE3. A Core Duo is basically a Pentium M + Cache + SSE3 + an extra core. Its a 1Ghz chip because its an ultra low power chip, this is how they can fit it into this form factor.
The specifications of the device are irrelevent as far as the end user goes, its designed to run what is basically Front Row with video up to 720p. A 1Ghz Pentium-M chip with a dedicated graphics chip can do this at ultra low power requirements and ultra low heat generation. How did you think they were going to fit something like this in half the size of a mac mini with the PSU inside?? What were you expecting, Core 2 Quads? 2 Gigs of RAM and a GeForce 8800?? Get real.
The *big* news here is the dedicated graphics. I think this points at a big likelihood of GeForce Go 7400s in the next model Mac Minis, MacBooks and base model iMacs. I'm guessing the chip was chosen due to its hardware video decoding acceleration for the AppleTV but Apple have a tendency to use common hardware across the board when possible. They're expecting to ship a bucket load of Apple TVs and putting the same chip in AppleTVs, Mac Minis and MacBooks will guarantee them the lowest cost per chip possible.