Not only does the RPi have HDMI (the new Video interface), it also has composite out for being compatible with legacy systems. In our case we are able to interface the RPi to a DVD player. Since the Rpi a little bit larger than credit card size, that makes it perfectly able to become a portable system with the DVD player. Just for being a media player makes it worth its thirty five dollars (plus shipping).
The RPI has other uses. The first as a desktop computer. You can do light business applications and even a few games. Featuring the LXDE interface, traditional MSWindows users should feel right at home using the gui environment. You probably want something better than a DVD player as a monitor, but it is definitely usable. The Debian Linux operating system has thousands of programs (depending on space) that you can easily download and install for free! So there is no shortage of software to start with like most new systems. You can even develop your own software.
The last feature I would like to discuss is that you can use the RPi as a variety of servers. Like most servers, the RPi will run headless (without a monitor). That means you can access the unit remotely from the computer you normally use, Saves electricity costs not having to use a monitor on the unit. Some people have said the Rpi only uses a few watts anyway!! One of the most popular uses is a web server. Setting up the web server is a easy as choosing an option from a menu instead of typing in lots of cryptic commands. Another words, you can have your own mini-web on your own network. What kinds of things can you do? See: http://www.instructables.com/id/Uses-for-your-own-private-cloud/
The Rpi could also be used as a low cost hub of a home automation system. There are so many possibilities, I can not even touch all or even a portion of them in this short article. What else can you do with the other media streamers on the market?
Also see: http://www.instructables.com/id/Raspberry-Pi-Jack-of-all-trades/
We have taught the Raspberry Pi to speak. Awesome for some Halloween animatronics. We also have since added web server software for a sort of a family blog. A replacement for the refrigerator magnets and all the notes. See: http://www.instructables.com/id/Raspberry-Pi-simple-blog-server/
Inexpensive LTSP client.
You can use your Raspberry pi as a thin client for the ltsp server (see: http://www.instructables.com/id/Another-almost-free-computers-thin-client-set-up/). it does not support etherwake though yet. I used an older version for testing and it connected to an Ubuntu 10.04 ltsp server.