HOW TO: Play DivX and Xvid on your Apple TV
The two biggest Apple TV limitations are the lack of codec support (like XviD, DivX, etc.) and not even having the ability to do basic 
surround sound like Dolby Digital 5.1. These issues were resolved almost immediately after the Apple TV was released, although the hacks were somewhat less than practical. Something as simple as getting your Apple TV to, say, sync and recognize your XviD movies as playable was no simple feat. Thankfully, that’s no longer the case, and we want to show you how to get the most out of your Apple TV. Who says you can’t have your cake and eat it, too?
Before we get started we would like to applaud the entire crew from AwkwardTV, if it wasn’t for their great Wiki, we may not have figured all this out. How-To: play DivX and Xvid on your Apple TV - Engadget