So far, Apple TV is considered a flop and during his speech, Jobs acknowledged the failure of  the device. But with the new, cheaper, version and boosted by the introduction of movie rentals, Apple TV could become a best-seller.

Users can rent movies for as low as $2.99 and watch them on their Macs or PCs, all current generation iPods, iPhone and Apple TV.

iTunes Movie Rentals will offer over 1,000 titles by the end of February, including over 100 titles in stunning high definition video with 5.1 Dolby Digital surround sound which users can rent directly from their widescreen TV using Apple TV. iTunes Movie Rentals are priced at $2.99 for library titles and $3.99 for new releases, and high definition versions are just one dollar more with library titles at $3.99 and new releases at $4.99.

“iTunes Movie Rentals instantly brings great movies from all the major studios directly to your iPod, iPhone, TV or computer—without having to drive to the video store or wait for DVDs to arrive in the mail,” said Steve Jobs, Apple’s CEO. “Movie lovers can now discover and enjoy movies as simply and easily as music lovers discover and enjoy music today on iTunes.”

Once a movie is rented, it starts downloading from the iTunes Store directly to iTunes or Apple TV, and users with a fast Internet connection can start viewing the movie in seconds. Customers have up to 30 days to start watching it, and once a movie has been started customers have 24 hours to finish it - or watch it multiple times.

Apple TV, now called Apple TV Take, has a new software that ensures a seamless integration with Movie Rentals, allowing movie fans to rent and watch movies right from their widescreen TV, with no computer required. Also, it can be used for viewing photos from the computers, Flickr and .Mac Web Galleries.

Apple has also slashed to price of the device. A 40-gigabyte model will be sold for only $229, while a 160-gigabyte model will cost $329. The company said the lower prices will take effect in about two weeks.