Become a MacRumors Supporter for $50/year with no ads, ability to filter front page stories, and private forums.
I also had this problem and nothing here fixed it, however the following did:

If your network is using dnsmasq, for most of you behind personal firewalls at home this would apply, apparently the app fails at connecting to Netflix servers this way and fails. Open your network settings and manually add or change your dns server to an opendns server or google dns at 8.8.8.8. This fixed things up for me.

Referenced: http://jpwhiteblog.net/2011/02/09/netflix-stalls-on-ipad-problem-resolved/
 
I tried all these things and none worked. Went to app store and installed netflix update....all good, back to Lost
 
It might be the date and time

For some reason, the date and time on your iPad need to match that on the server. So make sure your date and time are correct. This might be why a lot of you had problems for a little bit, but then the problem corrected itself (if you crossed time zones or your iPad took a little while to refresh the time and date). This was all I had to do to fix the problem
 
Fix from Netflix

This worked for me after some help from Netflix help centre

The issue is simple to fix
iPad settings>general>reset>reset network settings>Ok

iPad will restart
Back into settings>wifi and rejoin your wifi network

Netflix now works :)
 
Register on MacRumors! This sidebar will go away, and you'll see fewer ads.