How to play purchased DVD on Apple TV?

I'm planning on purchasing an AppleTV2 by Christmas. However I'm not sure how to view a purchased DVD movie on my TV through ATV2.
Do I need to convert the movie to a specific format? - Is this legal?

as dave hutch mentioned the word "legal" is a subjective word. in order to play a dvd on your apple tv you need will need to do some things. you first need to get that movie into your itunes library. personally i have been buying the "new releases" on those blu ray combo packs that most often come with a "digital copy" of the movie that you can copy into your itunes library. this is perfectly legal and if you buy the combo pack the first week of its release you can in a lot of cases get 3 versions of that movie for the price of a regular dvd. then once you have it in your itunes library it's as simple as enabling home sharing and you can watch to your hearts content on your apple tv.
if you don't have a digital copy you are going to have to break the encryption on to copy it, and the specifics to do that are not allowed in this forum, but a quick google search will get you to many ideas and software to do that. i am like dave and think that for my own personal use this method is legal.
what ever you decide good luck

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