How We Got Here
When people think of streaming, two things come to mind. First, that it is being downloaded over the Internet using a broadband connection provided by an Internet Service provider, and, second, that the picture is about as good as that of a DVD.
Of the two, the first thought that only the Internet is used for streaming is false. Satellite providers, like the Dish Network, send a video stream in real-time to a person's satellite receiver which then displays the video in standard or high-definition (depending upon what is being watched). Additionally a Dish Network also can provide a link up to the existing broadband connection to add streaming through the Internet for watching through the satellite receiver and onto the HDTV connected to it as well.
The second conception, that the picture seen through the Internet is about as good as a DVD, isn't really true. But it does have some basis. Services like Netflix stream video of movies through devices that initially only displayed standard-definition pictures. This is changing, with popular boxes like the Xbox 360 able to handle HD streams as well as Blu-ray players having Netflix functionality.
Truth be told, the quality of the HD stream is about what you'd expect from a highly compressed signal. There are artifact problems and some fuzziness at times. The AppleTV says it can display 720p high-definition (remember we're not talking about upscaling to match the native resolution for the HDTV), but it's still a compressed signal with some video problems that are apparant to the eye at times.
It's fair to say that the convenience of streaming HD makes up for the minor complaints. And since people tend to be forgiving when watching something they like, for practical purposes the HD quality is more than acceptable.