I haven't tried it yet, but I have downloaded the 2 episdoes of Viva Pinata and they look great.

I fully intend to rent some movies.  $3 to be able to watch it pretty instantly (SD movies will start playing about when they hit 7% downloaded per reports over at QT3) sounds like a great deal for me.  I won't be buying anything, but for renting, I think it is a brilliant idea.

Some friends have given this service a whirl and are finding that the servers are apparently pretty well swamped and it's taking horrendous amounts of time to download things currently.

Personally, I like the idea, and perhaps even the implementation, but think that the 20 GB harddrive is a very limiting factor (for stuff you'd be "buying" to own, rather than renting to watch one time), and the time to download an item may make it non-economical when compared to renting an HD-DVD movie, or Blu-Ray disc from say Netflix or Blockbuster (when they have them).

For people with long drives to local rental outlets, or in areas not close to the Blockbuster or Netflix by mail servicing centers, this might not be a bad deal, but it's up against competition such as Cable/FiOS's In-Demand, or DirecTV's pay-per-views, or Dish network's similar services.

If Microsoft gets the download time down, puts out a much larger harddrive for the 360, and focuses primarily on hi-def content -- along with more "to own" rather than "to rent" titles, then they may get somewhere with all of this.  If it remains primarily a rental model then it's a nice possibility that will likely see little actual use once the gee whiz new feature factor wears off.

Oh, I need to add that the 20 GB harddrive that I complain about above is a serious consideration since the drive only really has approximately 13.5 GB available for the user to begin with.  There's a batch of stuff on the drive that has to be there and limits the space available for users.

Not to mention that many users will download a demo and then don't want to delete it because it just looks so pretty (great graphics or some such) and they want it around to just get a taste of a game without having to buy it.  The demos are also great for helping to convince friends to get games or even get the 360, so again it's counter productive to force the users to have to clean up the space on the drive regularly.