We use Netflix through the Wii - works a treat over the wifi. Netflix is great if, like me, you like American tv series (Dexter, 24, Lie to Me, Sons of Anarchy, Breaking Bad - that kind of thing). It's good for kids cartoons too, although mainly the American rather confrontational type but it's not all that good for films if you like them fairly up to date or anything independent. Think of the cheap shelf they used to have in Blockbuster!
Overall for the £6 or so, I rate it.
ETA - In terms of "how does it work", you just download a thing from a link they give you - same as BBC i-player. I have no patience for IT things that don't work easily.
