I'm looking into buying an AppleTV and I can't tell from the documentation on Apple's site if it supports storing/reading movies from an attached USB Drive. A part of me thinks that they wouldn't support this functionality if they are trying to have a tiered product with varying HD sizes.
So, my question is, what can I do with the USB port? Read images? Read Movies purchased from the iTunes Store? Or is just for "looks"?
The (accepted) answer is only partially correct.
The USB drive of the Apple TV has no official use at the moment of this writing.
To be able to use it, you will have to hack your Apple TV. This required you to make a bootable USB stick (called a "patchstick", there are programs to automate the process, it's easy) and power cycle the Apple TV with the USB stick plugged in. More info here: http://wiki.awkwardtv.org/wiki/PatchStickBuilder
Then, you can enable the USB port in a variety of ways, the easiest of which is to install nitoTV. Advanced stuff includes installing boxee or XBMC on your device.
The Awkward TV wiki http://wiki.awkwardtv.org/wiki/Index.html holds much more information.
I'm a happy Apple TV user myself, it's much more useful when "patched". That does require you to do some tinkering every now and then. If you're somewhat comfortable with a Terminal window and/or able to follow instructions, you'll be fine.
You can play media located on any iTunes library on your network. I'm sure you attach a usb there.
As far as the AppleTV, the USB has long been identified purely for service, and disabled by the default software.
