It works great for me. It also works on my Apple TV. I'm able to display the movies on my phone, slideshows of my pictures, but no videos that I've taken with the phone. I'm assuming that will change with the next update. I'm also assuming that we'll soon be able to display Safari on an Apple TV via AirTunes as well as games... I don't see why you couldn't develop a game for the iPhone using the phone as a controller and the Apple TV as the screen, right now...
I'm especially excited because I've had 4.2.1 on my phone for a week or so now, but the Apple TV 4.1 update today finally unlocked video over AirTunes. That is the more exciting update for today.