Jailbreaking my Apple TV and installing XBMC
There is a lot of spam out there on jail breaking Apple TV and much of it is written poorly and if you are not careful or clear about what you are doing, you can potentially jail break, then update Apple TV and lose your jail break in the same process.

I am posting my approach here and hopefully it will help provide an accurate and articulate approach and avoid any mishaps when you come to trying it yourself.
My Apple TV shown below is the second generation unit, referred to as Apple TV 2, and was running 4.1.1 of Apple TV OS.

Firstly, expel some myths:
Jail Breaking
There seems to be two options for jail breaking
Note: If you are running Windows 7 as I am, I found it failed to Jailbreak the first time. I took a punt and ran it As Administrator and it worked after that. I based this punt on experience in the past with Blackra1n on the iphone, where that was necessary to operate properly.
Unplug your Apple TV device from it's power supply and also from your computer if you have it plugged in.
Launch GreenPois0n and take notice of the warning for when you have completed the jail break.

Ensure your Apple TV is powered off and disconnected completely from your PC then click Prepare to Jailbreak (DFU) to commence jail breaking.

Follow closely the on screen prompts to put your device into DFU mode. When it is successfully in DFU mode, the white light on the front of the Apple TV will flash fast and the Waiting for DFU button will change to Jail Break which you should then click to commence the jail breaking activity. You may need to repeat this process until you get your timing right and the button becomes enabled.

When the jail break is complete, select Quit and then wait for 1 minute before unplugging your device from your computer.

Take the Apple TV device and connect it to your TV and turn it on. You will see a new Tab in your Apple Tv Screen while the Apple Logo will be replaced by the Skull .

Select the tab and go to GreenPois0n > Inject Software > Cydia Payload as shown above.
Your device will install Cydia and then reboot and you will get a new menu item called NitoTV. Select NitoTV and in the submenu select Install Software. Find XBMC-ATV2 and hit install this package.
It will automatically download and install XBMC. After install Apple TV 2 will automatically reboot. If you are prompted to Update your Apple TV, do not, select cancel instead.
After the reboot, you should install a second package called UpdatesBeGone to block the updating of the Apple device. This update can be found here: NitoTV > Install Software > updatesBeGone. This update will also stop your Apple TV device from rebooting.
Your Apply TV will reboot and you will then see a XBMC menu with a menu item XBMC which you can execute to run XBMC.

Run XBMC and then commence setting up your new media centre.

I then added some video sources (e.g. Adding Media Sources in XBMC) and it worked straight away. I used to FTP files back and forth on my old XBOX running XBMC, but I found that this new deployment process worked seamlessly and with less hassle in the long run.

I am posting my approach here and hopefully it will help provide an accurate and articulate approach and avoid any mishaps when you come to trying it yourself.
My Apple TV shown below is the second generation unit, referred to as Apple TV 2, and was running 4.1.1 of Apple TV OS.

Firstly, expel some myths:
- There is an easier way to do all of this than this link suggests
- You don't need to run a specific version of iTunes, I just ran the latest version available.
Jail Breaking
There seems to be two options for jail breaking
- Tethered - where you need to connect your Apple TV to your PC/Mac just to boot it EVERYTIME - I could not work out why anyone would want to do this.
- Untethered - where you do not need to connect your Apple TV to your PC/Mac just to boot it. This seems like the only useful option to me, and this is what I did.
Note: If you are running Windows 7 as I am, I found it failed to Jailbreak the first time. I took a punt and ran it As Administrator and it worked after that. I based this punt on experience in the past with Blackra1n on the iphone, where that was necessary to operate properly.
Unplug your Apple TV device from it's power supply and also from your computer if you have it plugged in.
Launch GreenPois0n and take notice of the warning for when you have completed the jail break.

Ensure your Apple TV is powered off and disconnected completely from your PC then click Prepare to Jailbreak (DFU) to commence jail breaking.
Follow closely the on screen prompts to put your device into DFU mode. When it is successfully in DFU mode, the white light on the front of the Apple TV will flash fast and the Waiting for DFU button will change to Jail Break which you should then click to commence the jail breaking activity. You may need to repeat this process until you get your timing right and the button becomes enabled.

When the jail break is complete, select Quit and then wait for 1 minute before unplugging your device from your computer.
Take the Apple TV device and connect it to your TV and turn it on. You will see a new Tab in your Apple Tv Screen while the Apple Logo will be replaced by the Skull .

Select the tab and go to GreenPois0n > Inject Software > Cydia Payload as shown above.
Your device will install Cydia and then reboot and you will get a new menu item called NitoTV. Select NitoTV and in the submenu select Install Software. Find XBMC-ATV2 and hit install this package.
It will automatically download and install XBMC. After install Apple TV 2 will automatically reboot. If you are prompted to Update your Apple TV, do not, select cancel instead.
After the reboot, you should install a second package called UpdatesBeGone to block the updating of the Apple device. This update can be found here: NitoTV > Install Software > updatesBeGone. This update will also stop your Apple TV device from rebooting.
Your Apply TV will reboot and you will then see a XBMC menu with a menu item XBMC which you can execute to run XBMC.

Run XBMC and then commence setting up your new media centre.

I then added some video sources (e.g. Adding Media Sources in XBMC) and it worked straight away. I used to FTP files back and forth on my old XBOX running XBMC, but I found that this new deployment process worked seamlessly and with less hassle in the long run.