I expect the new AppleTV will have video in and out, so you could hook it between your cable box and the TV, and that it would pass through the video. I also expect that it you can run current iPad apps on your TV. But the kicker is I expect that new apps will be able to overlay their output on top of the TV output, so you could make widget apps, like weather, stock or sports tickers, and so on.
As a software developer, I'm very interested in this possibility. What kind of apps would you like to see overlaid upon live TV?
My Lg 1080p LCD has built in widgets and built in Nerflix. Why pay for a iTv box when you can get these sets from fry's for under 600?