[HOW-TO] - Watch .avi formated Videos in Apple TV 2

• At first I managed to install XBMC on my Jailbroken Apple TV 2 correctly.

• But I am unable to correctly install the Video sources.
• However, below is how I do it on my Macbook Air.

• You’ll need a jailbroken AppleTV and either the Boxee or XBMC apps. I prefer XBMC because I like its simpler and modern interface. Boxee is too bloated and I hardly use it.

• First, you’ll need to set up your Mac OS X (please go elsewhere for help on Windows; I’m a strict Mac user) to support SMB networking. To do so, launch your Mac OS X’s System Preferences -> Sharing -> (Tick) File Sharing -> Option -> (Tick) Share files and folder using SMB (Windows), and tick your user account followed by entering an access password of your choice. Congrats, you have enabled your Mac OS X’s SMB support!

• Next, you’ll tell OS X which folder or folders you want to allow Sharing, ie, give access to XBMC. Let’s share the “Downloads” folder where you are keeping your .avi/.wmv/.rmvb etc files. From the Finder, select the “Downloads” folder and right-click to select “Get Info”. In the pop-up Get Info window, tick the “Shared folder” check box under the “General” section, and you’re done.
• Repeat for any other folders you want to give XBMC access to. Although you can share an entire hard disk but I suggest you do not do that as both XBMC and Boxee will take seemingly forever to scan the huge contents! Just add individual Share points/folders for better management and privacy.
• To watch a .rmvb in the “Downloads” folder using XBMC, simply launch your AppleTV’s XBMC app from the “Launcher” menu and select “Videos” from the options. You should now see a list of folders except the “Downloads” folder because you haven’t added it.
• Let’s add it now; select Add Source -> Browse -> Windows network (SMB) [you'll probably need to scroll down to see it] -> WORKGROUP -> Your Mac -> Highlight the “Downloads” folder -> Confirm it by selecting “OK” [press the left "prev. track" button on the Remote]. Finally give it a nice name and save it. Done.
• Do note that when you enable a folder, you also enable every sub-folders within it. To exclude a sub-folder, “Get Info” on it and un-tick the “Shared folder” option for it.
• You can now select the newly added “Downloads” folder from the list, locate the .rmvb file and play it on your big screen TV!
• While watching any video, pressing and holding the “Play/Pause” button for a few seconds will drop down a Controller where you can control the video, make adjustments to its audio and video settings etc. Press “Menu” to dismiss it. You can also press the +/- buttons to adjust the volume, the left/right buttons to rewind/fast forward (press again to adjust the rate of change between 2X to 16X.)
• To exit XBMC, press “Menu” until you return to XBMC Home screen. Then press the left button to go down to the “Power” menu… and select “Exit” from the options.

Source: How to Watch non-MP4 videos in Apple TV