|Version||Apple TV 2||Apple TV 3|
|Processor||Apple A4 chip||Apple A5 chip|
|Video Format||HD - up to 720p||HD - up to 1080p|
Everything else is the same.
The Apple TV 3 is a bit quicker and it supports Full HD (1080p) rather than just HD (720p).
If you prefer purchasing and renting HD movies and TV shows, and your TV supports Full HD (1080p), then the Apple TV 3 is the way to go.
If you prefer the less expensive Standard Definition movies and TV shows, or if your TV only supports HD (720p) rather than Full HD (1080p), then the Apple TV 2 is perfect for you.
HD movies are more expensive to rent or buy on the iTunes Store. The file size of HD movies is about 2GB larger than the Standard Definition file size.