The creators of the Raspberry Pi, an ultra-cheap computer capable of pumping out 1080p video and desktop Linux, has been demoed running XBMC. The $35 computer can fit in the palm of your hand, and includes HDMI, ethernet, onboard storage via an SD card, a 700MHz ARM11 processor, and 256MB of RAM—not exactly a powerhouse, but enough for basic computing (and AirPlay!). Using a hardware video decoder, the device can output full 1080p h.264 video with ease, making it a viable alternative to the Apple TV for watching local content. XBMC is a popular media center program that can be run as its own operating system, so it is a perfect match for the tiny Raspberry Pi.
Production of the Raspberry Pi recently began, and it is expected to be on sale within the next few weeks. An even cheaper model without ethernet will also be available for $25.